Long-term investors in Bank of America (BAC) may find this review and information useful. The following items were reviewed for the 10 years ending December 2001 through 2011
- Net income
- Share repurchases
- Long-term debt
The first thing that stands out:
- The increase in long-term debt
- The percentage of revenue and net income used to repurchase shares when $0 was spent during the last four years.
- The number of years of net income in 2011 required to cover the long-term debt.
What happened to long term debt?
It moved higher.
- 2002: Long-term debt was $ 60.2 billion
- 2011: Long-term debt was $372.3 billion
Long-term debt increased $312.058 billion or 518%
What happened to revenue?
- 2002: $34.494 billion
- 2011: $93.454 billion
How many years of revenue would it take to pay off the long-term debt?
- 2002: 1.75 years
- 2011: 3.98 years
What happened with net income?
- 2002: Net income was $ 9.249 billion
- 2003: Net income was $10.810 billion
- 2011: Net income was $ 1.446 billion
How many years of net income would it take to pay off the long-term debt?
- 2002: 6.51 years
- 2003: 6.97 years
- 2011: 257.44 years
What percentage of net income was paid out in cash the past ten years?
- 65.0% was enjoyed by owners in dividends, or $62.571 billion
- 49.3% was enjoyed by departing owners, or $47.432 billion
- 114.3% was the total payout ratio
How many years was cash paid out?
- 10 years for dividends totaling $62.571billion. An $6.257 billion year average
- 6 years for treasury stock purchases for nearly $47.432 billion. An $7.91 billion a year average
What percentage of revenue went for dividends and share repurchases?
- 8.7%: 10 year total for dividends
- 6.6%: 10 year total for share repurchase
- 2011: 1.9% of revenue went for dividends
- 2011: 0.0% of revenue went for the repurchase of shares
- 2002: 10.8% of revenue went for dividends
- 2002: 21.6% of revenue went for share repurchases
Where was the information found?
- 10-K filings at sec.gov website.
Why should common stock investors care about the increased levels of long-term debt?
- Fixed income investors may have the maximum percentage of Bank of America issues in portfolio's. Finding new investors may require yield enhancement resulting in less cash available to common shareholders.
- Asset sales may put further pressure on asset prices.
The risk-reward may favor preferred and or fixed income investors at this time. Longer-term investors may want to use the dividend or interest cash-flow to build a position in the common stock.
All investors, (common stock, preferred stock and fixed income), may have enjoyed better returns had less revenue and net income been allocated for share repurchases.