Bank Of America: The Deal Is Done

| About: Bank of (BAC)
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BAC has finally settled with the Department of Justice.

This has been the biggest hurdle the bank had to overcome for the stock to gain traction.

While there are more headwinds, Bank of America has finally done what it had to do.

The waiting game is over for shareholders of Bank of America (NYSE:BAC). The bank has finally reached a settlement with the US Department of Justice.

While the amount is a whopping $17 billion, BAC had to put this to rest to clear the path for shareholders to finally see the value of their stock rise. As I noted in my previous article on BAC:

While I still might call buying shares of Bank of America (BAC) a bet, I do believe that now might be the right time to go long on this stock. As everyone reading this knows, I have been negative on BAC since I sold it, feeling that the litigation overhang would be with us for an extended period of time.

Any good investor will not ignore the facts or changes when they slam us in the face. The news that the Fed has granted BAC the ok to raise the dividend is the first step, and the rumored news that FINALLY BAC is headed towards a settlement with the Department of Justice, is enough for me to take a long position in Bank of America shares.

Now Dividend Story Also Begins

While it might not sound like a lot, BAC did increase the dividends (with the regulators approval) to $.05/share or a 400% increase.

Bank of America Corp said on Wednesday the Federal Reserve has approved its plan to raise its quarterly dividend for the first time since the financial crisis......The dividend increase is the latest step toward normality for a bank that is still trying to move past the financial meltdown. But the dividend would still be far below its pre-crisis level.....The bank won approval to increase its dividend only after having its prior proposals for the 2014 process rejected twice. The Fed nixed the bank's first request because it was too high, and its second request because the bank found a mistake in the way it accounted for its liabilities for regulators that ended up cutting its capital levels, or its assets minus liabilities......Raising the dividend has been a top priority for Chief Executive Brian Moynihan. Prior to the crisis, the bank paid a quarterly dividend of as much as 64 cents per share, a level that it cut in half for the fourth quarter of 2008 and then cut to a penny a share in 2009. Those high dividend payouts made bank stocks a standard holding for investors seeking income from their portfolio.

I can now add to this stock to my dividend income portfolio as I believe that with continued revenues, and earnings growth, BAC will be able to get approval to raise its dividend regularly....and perhaps once again become a dividend champion.

All Is Not Rosy However

Let's not forget that there are still many small civil suits (some are not so small) that will wind their way through the court system. It only takes one major ruling against BAC for the stock to take another hit.

That being said, I am a buyer at these levels and I feel the 20% gap between the share price and book value will close sooner than later.

Disclaimer: The opinions of the author are not recommendations to either buy or sell any security. Pease remember to do your own research prior to making any investment decision.

Disclosure: The author is long BAC.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.