Ganesh Sastri

Bank of America vs. Banco Santander: Whose Dividend Is Secure?

It is a FUNDAMENTAL flaw to base any decision on dividend yield. Instead work out E/P %. This is the inverse of PE ratio expressed as a %. Just assume that all of the net income belongs to the shareholders and work out the E/P %. For BAC based on estimated EPS of $ 2.42 for year 2008 and market price of $ 23.5 this works out to 10.3%. That is the yield. If dividend exceeds EPS, the excess is just return of money and NOT return ON money. Obviously if the estimated EPS is less, the E/P % will be lower.