A little over three years ago, IFTF came to readers with two inaugural articles. The first article was on the author’s Biggest Regret. The second was our first recommendation ever: Bank of America (BAC). Let’s revisit that article and our recommended path going forward.
In the three years since recommending BAC, we’ve seen the company share price fluctuate, mostly moving upwards. We ended the 2013 article by stating we believed that shares would be worth $25-30 in 2017.
Today, Bank of America shares sit at $20.36. That is an increase of $7.30 per share from the 2013 price of $13.06, or a 56% increase, without including dividends. In addition to the low share price, IFTF recommended BAC in 2013 because of the potential for an increase in dividend based on the company’s historical numbers.
Let’s quickly look at the dividend over the last four years:
In 2013 BAC initiated a dividend of .4 per year.
In 2014 BAC increased its dividend to .20 per year.
In 2015 BAC continued its dividend of .20 per year.
In 2016 BAC increased its dividend to .30 per year.
While those dividend payments aren’t enough to retire off to the beach, there are two things to take away from the those numbers: first, a sum of an additional 74 cents gained for each $13.06 share you bought. More importantly, the dividend is increasing on an almost yearly basis. IFTF mentioned that three years ago, when BAC paid out an annual dividend of $2.42 a share. Currently at 30 cents a year, the dividend has a ton of room for growth, even if it only gets back to half of that historical number.
At this point, you are probably thinking one of two things: I’m glad I went ahead and bought some shares at $13.06 back in the 2013, OR – I didn’t buy any at $13.06 or at all for the matter. Is it too late now?
IFTF doesn’t believe it’s too late at all. In fact we believe the BAC story is just beginning. If you bought shares in 2013, you took on the initial risk, as there was tons of litigation for the bank to navigate and barely a dividend to boot. Your risk has been rewarded with almost a 62% return (between price appreciation and dividends). That’s a 20.6% return on investment yearly. If you waited or haven’t participated yet, most if not all of the litigation risk has been eliminated, the bank’s path is even clearer, and the dividend is increased. It’s all a matter of BAC executing its operations.
In 2013 IFTF was bold enough to say BAC would reach the $25 mark in 2017. Now, sitting at $20, we still believe that will be the case. The question you need to ask yourself is: What will it be 3 years from now? IFTF believes it will be much higher than it is today. Good luck!