hendi_alex

U.S. Bank Dividend Yields Revisited

Previous pseudonym was 'eyes wide opened' chosen for one post many months ago. Have updated pseudonym to match that used at investorvillage.com boards.

U.S. Bank Dividend Yields Revisited

I like BAC and have been considering taking a position in this beaten down financial giant. Regardless of a dividend cut or not, would consider the stock to be a great long term investement. But shorter term, related to the timing of an entry, does anyone have a concern over the POR of the bank. Yahoo shows the payout ratio as 104%. The dividend is 64 cents per quarter, and earnings.com shows earning of Q2 2007 through Q1 2008 as $1.28, .82, .05, .23. I'm wondering how much of those earnings are related to write downs that may have nothing to do with short term cash flow. Am also thinking that much of those 100% writedowns will not really be 100% losses and in the next year or two will be added back to the books. Finally, I would think that as soon as write downs are history, the earnings number will immediate rebound to a decent level. Anyone have a guess as to the likelihood of a dividend cut for BAC. It would seem that shortly after such a cut may be the best time to initiate a postition in the bank.

U.S. Bank Dividend Yields Revisited

It may be worth noting that during this past year that both USB and BBT have increased yields not only via share price drop but also because of increasing their distribution level. USB raised its quarterly dividend from 40 cents to 42.5 cents per share for its January payment. BBT just announced a dividend increase from 46 cents to 47 cents per quarter, with its August first payment. For USB, the dividend represents a POR of 68.6% vs. Q1 earnings of 62 cents. For BBT the dividend represents a POR of 64% vs. Q1 earnings. IMO it is premature to say whether the earnings have stablilized yet for either of these banks, but there is a nice margin of safety supporting the current dividend levels. Further these companies, IMO, would not be raising distribution levels if they anticipated any likelihood of a dividend cut in the next year.

Note: I own shares of USB, BBT, and IAT, consider each to represent value at current prices and am accumulating in small incremental purchases.