US Bank Stock Dividend Possibly Increasing
Quick Facts:
- Bank of America’s stock has been a whopping $0.01 since March 27th, 2009
- An increase in bank stock dividends will likely lead to an increase in stock prices
Our Worldwide Economies
In 2008, we witnessed one of the worst financial malfunctions in our history. With Bear Stears going bankrupt and other great companies falling one after another, it seemed like all hell was breaking loose. We still feel the problems to this day with high unemployment figures all over the world hurting our economies inside and out.
Banks are an integral part of our financial system. We’ve come to hate them because they charge us for keeping our money. I could walk outside and ask ten people and I’m pretty sure 8 or 9 of them will give me a negative comment about their local bank.
One Person’s Trash is Another’s Treasure
You hear it all the time and you think it’s always about someone else. Well when the markets collapsed worldwide in light of what was going on, the smart people were out buying all the bargains they could get their hands on. A lot of companies that were actually quite stable were being sold off like mad, and had you been in the middle of it, you could have come out with a pretty penny.
I was talking to a friend the other day about when I bought Royal Bank of Canada stock at $26, only to sell it at $35. A $9 or 36% gain is nothing to be disappointed about, but in hindsight I should have kept it as the stock eventually went to $62.89 (CAD) before easing off. Today, it’s at $54.99.
I’m not here to brag about my past trades or investments, I’m here to tell you that when the general public and the government says there’s problems, there’s money to be made if you have the courage to go after opportunities.
Increasing Bank Dividends and What it could mean
I’ll give you an example. I don’t want you to follow my example just because I’m writing it, to be honest I haven’t been following American stocks a whole lot but I am doing so for the purposes of this blog post.
Bank of America’s (BAC-NYSE) stock is sitting at $12.13 as of yesterday’s close. The stock has a penny dividend distributed every quarter or three months. So on an annual basis, you get $0.04 on a $12.13 investment, a 0.33% yield. That’s nothing to go crazy about. Mind you, Bank of America reported that it lost $0.80 for every share last quarter so they’re still in the midst of sorting out their mess especially with all those foreclosures. That goes for all banks however.
I’m sure you’ve heard the term, “Too big to fail.” Well regardless of what you’ve heard, it’s true. There are companies that the US and other countries cannot do without. If a company of Bank of America’s scale were to go under at this point, it would put a huge dent in the world. It won’t happen, so you’re pretty much guaranteed a non-failing bank, even if they were to report losses for an extended period. Once the economy picks up, people will have more money and hence the banks will begin to make more money.
Either way, with the rumours going around that banks might increase their dividends, it means it might be a good time to stock up on the solid banks. You can’t expect Bank of America’s dividend to stay at a penny forever. Most likely in the next 10 years, you’ll most likely see it go up twenty or even fifty fold, depending on how well the bank does.
That doesn’t mean you should buy it now, you need to do your due diligence and look at all the banks in the US and possibly abroad to see how the financial industry is doing in general. But you can see that this is a decent opportunity. If the US banks were to increase their dividends, it’s pretty safe to say that their stock prices will go up. Not only because it shows financial strength (and it actually always doesn’t) because the bigger banks are so famous, the hype itself will push the share prices higher.
So if you have money in GIC lying around, think about it. I’m not guaranteeing returns, and I personally wouldn’t put money in a company losing money. But, I would look around and see what banks have the potential to come out strong and benefit from an economic recovery and an increase in dividends. My two cents for today, thanks for reading!
Dividend button photo by Marion Brite on Flickr.
