Bank of America Plans to Boost Quarterly Dividend

Shares of Bank of America (BAC) were 2.2% higher in recent pre-market after the lender said late Wednesday it plans to boost its quarterly dividend by 60% to $0.12 per share starting in Q3, adding that its board authorized a $12 billion share buyback plan after the Federal Reserve did not object to both actions. With the go-ahead to boost its dividend, Bank Of America shareholder Berkshire Hathaway (BRK.A, BRK.B) will be able to exercise a stock swap of preferred shares into common shares, reports said citing a Feb. 25 letter from Berkshire CEO Warren Buffett.

In the letter, Buffett said, “If the dividend rate on Bank of America common stock — now 30 cents annually — should rise above 44 cents before 2021, we would anticipate making a cashless exchange of our preferred into common.” Berkshire holds warrants to acquire 700 million common shares of BAC at $7.14 per share, or about $5 billion. If the company were to exercise the warrants instead of waiting until just before their expiration in 2021, Berkshire would be able to net a profit of about $12 billion and also become the bank’s biggest shareholder, according to reports.

Leave A Reply

Your email address will not be published.