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Bank Of America Corp (BAC) Boosts Dividend For First Time In 7 Years

Market reaction to the dividend increase is muted since most investors expected something before the end of the year

Bank of America Corp (BAC - Get Report) was able to increase its dividends for the first time since the financial crisis after the Federal Reserve announced that it had approved the banks resubmitted capital plans earlier today. Bank of America's original capital plans were also approved by the Fed, but when it discovered errors that affected the results of the stress test it was forced to go through the process again. Bank of America has increased its quarterly dividend from $0.01 to $0.05 per share.

Market is unmoved by dividend increase

Bank of America Corp (BAC - Get Report) watched its stock drop 6% when it first told regulators that it had found a mistake in data it used for the 2014 Comprehensive Capital Analysis and Review CCAR, because it meant not only that it would have to spend time and energy preparing another capital plan, but that buybacks were probably off the table for the year. Bank of America re-submitted its plans on May 27, according to its press release.

Analysts did expect to see a dividend increase this year once the new plans were approved, which probably explains why the market hasn't had a bigger reaction to the news BAC is up about 0.5%, but still below the last month's average price.

At the time Morgan Stanley analysts Betsy L. Graseck and Michael J. Cyprys felt that the market was also assuming there would be no buybacks through 2016, which seemed like an overreaction considering the amount of capital that Bank of America has on its balance sheet and goes counter to CEO Brian Moynihan's stated goal to return capital to shareholders.

Bank of America dividend increase follows Zions recent capital plan approval

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C $52.83 -0.97%
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