On Jun 6, 5:25*am, "W. Wells" <ot...[at]nc.rr.com> wrote:
- quote -


What good is an 8% dividend if the stock price sinks 8%? Or more?

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On Jun 6, 7:25*am, "W. Wells" <ot...[at]nc.rr.com> wrote:
- quote -

What good is an 8% dividend if the stock price falls 40%? That's not
my kind of investment. Of course, I'm still waiting on that broken
part for my crystal ball, so who knows...

And what good is their promise? A) they are under no obligation to
keep it and B) if they DO honor their word it is likely preventing all
those "financial folks" and their listeners from buying the stock
(thus keeping the price down). It sounds like a lose-lose situation to
me.

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"W. Wells" <otf70[at]nc.rr.com> wrote
Some comments on the basics:

I am doubtful bank's financial records are transparent
enough to say much other than, if you buy BAC or any other
bank (with at least ostensibly decent fundamentals, insofar
as these can be gleaned), plan on holding for the long run.

Note that BAC's dividend payout ratio exceeds 100%. On the
other hand, NYB (a much smaller bank with arguably a
different focus) has had a DPR exceeding 100% for a couple
years now, said a couple years ago it would not slash
dividends, and has not.

Washington Mutual slashed its dividend in December and then
slashed it again to nearly 0 a few months later. Many
Citigroup officials said a dividend cut was unlikely, then
the C Board cut the dividend.

I'd say it's a good sign that BAC may be buying Countrywide.

I would review the period from about 1990-1991 concerning
dividend cuts and banks folding, since IMO there are
parallels to today. The typical large bank's dividends and
share price recovered.

There's a reason banks historically trade at lower P/Es than
the S&P. Namely, risk.

OTOH, many of the observations above use numerology. I'd say
if one feels compelled to hold BAC, buy a small position,
well south of 5% of your total portfolio, and reinvest
dividends while the share price seems low.

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BAC has a dividend rate of 8% right now. They promise they are not going to
cut their dividends. However many financial folks say the banks are crazy to
borrow money on one hand and pay out billions to dividends with the other.
The last president of a bank that said they were not going to cut dividends
just got fired. WB.

Comments?

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