The results of the Fed's stress test are due to be announced today at 4, when investors will get to see just how prepared the big banks are in case of another major economic downturn. In this segment from Thursday's Where the Money Is, Motley Fool banking analyst David Hanson discusses how the stress tests work and the three scenarios that the banks will be tested on, and he also shines some light on the biggest risk for shareholders of a bank that performs poorly in the tests.
Stress tests are also a way for the big banks to prove that they have the ability to pay out higher dividends or initiate a share repurchasing program, without putting shareholders at risk. David discusses whether or not Bank of America (NYSE:BAC) could raise its famously low dividend after this round of tests, and when investors might see that change.
David Hanson has no position in any stocks mentioned. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America and Citigroup. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.