Bank of America Corp (BAC)

[Portguyofva]

Quote: "Dividends for preferred stocks looks pretty nice"

Dan,
I have been looking at the same data, but what I find more interesting is the redemption of preferred shares in June (refer to BoA PR on 18 and 22 June 12).

BoA issued redemptions on approximately $4.3B Trust Preferred Securities in June. The savings from these redemptions alone would enable BoA to double their current dividend on the common stock.

A double of the current dividend moves the yield from 05.% to 1.0% (assuming a $8 cost average). That is a significant move and IMO will make a real difference. IMO, BoA will continue to add free cash to the bottom line at a rapid rate over the next couple of years. Waiting for an announced 10 to 20 cent appreciation in the dividend, will cut the potential yield in half because the underlying stock will likely have more than doubled by that time. Note: a 20 cent dividend on an $8 base price gives a 2.5% yield and IMO is very achievable in the next 6 to 9 months. I'm targeting a 36 cent dividend in two years which equates to a 4.5%+ yield, and the underlying stock price will have more than doubled by then.

I would think twice about unloading your shares after you get back in the green. A couple years from now, an $8 to $9 entry price will seem cheap and the dividend yield will be significant.

Disclosure: I continue to add on weakness. Trade Leap Call options when I can and use proceeds to buy more common. My goal is to be holding 20K+ shares of common before BAC breaks through $10 and maintain my common dollar cost average around $7.GLTY!