Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Here’s Why Bank of America Corp Could Soon Hit $20

Shares of Bank of America (NYSE: BAC  ) are surging and could go higher. In fact, it wouldn't be unreasonable to think that they could soon eclipse $20 for the first time since the financial crisis.

There are a number of reasons for this, but two stand out from among the rest.

In the first case, Bank of America may be on the verge of increasing its dividend. And not, mind you, by a marginal amount. Analysts at Citigroup (NYSE: C  ) predict that the Charlotte-based bank could more than double its quarterly payout. And researchers at Markit Group believe the bank might quadruple it.

Either way, it's dependent upon the Federal Reserve's approval of Bank of America's capital plans in the ongoing Comprehensive Capital Analysis and Review process. This should wrap up in the middle of the month, and it's then shareholders in the nation's biggest banks will know whether or not they'll be the recipients of more generous quarterly checks.

Given Bank of America's progress since 2011, I tend to agree with the analysts and Citigroup and Markit Group. Where I differ is in predicting the magnitude. But regardless of whether it's a little or a lot, its symbolism could easily serve as a catalyst for the bank's share price.

This, in turn, brings me to the second reason that Bank of America's shares could continue their ascent. That is, despite the company's progress at putting the financial crisis in the rearview mirror, its stock still trades for a discount to book value.

At 0.81 times book, Bank of America is the cheapest big bank other than Citigroup, which is valued at 0.77 times book. By comparison, JPMorgan Chase (NYSE: JPM  ) and Wells Fargo (NYSE: WFC  ) are trading at multiples of 1.08 and 1.56 times book, respectively.

Now, to be clear, there's little use in hoping for complete convergence here. Despite Bank of America's hard work over the last few years, it's still a fraction of the operations that JPMorgan and Wells Fargo are. But all it would take for Bank of America's stock to get to $20 is a 15% increase in its valuation to 0.93 times book -- still below JPMorgan and Wells Fargo as well as the benchmark figure of one times book.

In sum, if you're a shareholder in Bank of America, as I am, then these two things should give you hope that more gains lie ahead.

Do you hate your bank?
If you're like most Americans, chances are good that you answered yes to that question. While that's not great news for consumers, it certainly creates opportunity for savvy investors. That's because there's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional brick-and-mortar banking model. And amazingly, despite its rapid growth, this company is still flying under the radar of Wall Street. For the name and details on this company, click here to access our new special free report.

Read/Post Comments (2) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 07, 2014, at 8:36 AM, Rifleman3006 wrote:

    Wow, I was ready for another Bank of America slam. Those who are invested in the bank already know it will hit $20 and beyond, Just a matter of time. Can't help but go beyond 20 based upon the banks fundamentals.

  • Report this Comment On March 12, 2014, at 2:30 AM, The1MAGE wrote:

    I'm not sure I caught too many slams against Bank of America from Motley Fool. Maybe some articles that mentioned the work, and lawsuits they were still working on, but mostly I seemed to get a good vibe from Motley Fool about this company.

    Interestingly this is not one of their Stock Advisor picks, but has become my highest % return stock, and has grown into my 5th largest holding.

    I see them bumping up the dividend, but think they will want to keep it light enough to keep buying back stock at least as along as it is below book value.

    If I can be bold enough to make a prediction, I see this stock going to $30 in 2016, possibly 2015. They will need at lest one, if not two bumps in the dividend to see this, (almost double current price,) but I see that happening.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2866990, ~/Articles/ArticleHandler.aspx, 8/28/2015 4:10:38 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

John Maxfield

John is The Motley Fool's senior banking specialist. If you're interested in banking and/or finance, you should follow him on Twitter.

Today's Market

updated 6 hours ago Sponsored by:
DOW 16,654.77 369.26 2.27%
S&P 500 1,987.66 47.15 2.43%
NASD 4,812.71 115.17 2.45%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/27/2015 4:00 PM
BAC $16.44 Up +0.38 +2.37%
Bank of America CAPS Rating: ****
C $53.44 Up +1.16 +2.22%
Citigroup Inc CAPS Rating: ***
JPM $64.48 Up +1.57 +2.50%
JPMorgan Chase & C… CAPS Rating: ****
WFC $54.03 Up +1.73 +3.31%
Wells Fargo CAPS Rating: *****