On Jan 20, 9:06*am, "W. Wells" <ot...[at]nc.rr.com> wrote:
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further price declines? Dividend cuts?

"W. Wells" <otf70[at]nc.rr.com> writes:

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Well, they may have to cut the dividend to make up for losses on their
loan portfolio. IMO, a lot of the decline in bank stocks is being
driven by panic selling, but some of it is also being driven by more
rational concerns about future earnings and profitability, as well as
pricing in risk that some banks may not survive at all.

-Sandra the cynic

Why do you figure Wachovia (WB) will probably maintain its
dividend for several years?

Repeat: Investors do not like uncertainty. Uncertainty with
mortgages continues to affect the entire economy. The
mortgage crisis (foreclosures and securities that are
nothing more than re-packaging of high risk loans) is
producing a shortage of dollars (personal and company) to
stimulate the market. Driving down stocks... and round and
round we go.

In view of these uncertainties, WB is priced "accurately."

OTOH, suppose WB does have enough writedowns that it has to
slash its dividend. Figure on the order of 50%. Whence the
yield will still be around 4%. Reinvest dividends, and in
ten years you could be in fat city.

Google for {Wachovia dividend writedown} and note the dates
of the article reports.

Regardless, do not buy any stock unless you are buying for
the long term. Stay diversified. Bank stocks' P/E ratios
historically are much lower than the S&P average of about 15
for a reason. Namely, banks are riskier. See the chart at
http://finance.yahoo.com/q/bc?s=WB&t=my&l=on&z=m&q=l&c=

W. Wells wrote:

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The risk that the potential further drop in stock price is not
compensated by the high dividend.
The risk the dividend will be cut in half.

If you knew precisely what WB's assets looked like, and whether their
subprime portfolio was reflected in the current price or the current
price is an over-reaction to the market panic, you could make a better
decision.
JOE

WB has sold for $60 in the past, is at $ 30 now. Has a 8.53% dividend. May
not be back to $60 again for several years but will probably get the
dividend until then.
What's wrong with this picture?