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3 Reasons Bank of America Corp’s Stock Doesn’t Belong in Your Retirement Portfolio

Say what you will about Bank of America (NYSE: BAC  ) -- and I've said plenty, both good and bad -- but it's hard to argue that its stock belongs in the average retirement portfolio.

There are three reasons for this. First, it's one of the most erratic blue chip stocks in the market today. With a beta of 2.02, the Charlotte-based bank is more than twice as volatile as the broader market.

Second, while most retirees look to their portfolios for income, Bank of America pays a paltry $0.01 per share in quarterly dividends. This equates to an annual yield of only 0.3%, or well below the S&P 500's 1.98%.

Finally, while many see the bank's low valuation multiple as a good thing -- that is, as an opportunity to get in while it's cheap -- it's also indicative of a troubled company. Why else would a major bank trade for 27% less than book value while better-heeled competitors like Wells Fargo go for a 62% premium?

As Motley Fool contributor John Maxfield discusses in the video below, the conclusion is that Bank of America's stock should probably be avoided if you're nearing or in retirement and preservation of capital is an important priority.

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Read/Post Comments (5) | Recommend This Article (12)

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 May 11, 2014, at 11:42 PM, cberis wrote:

    Come on now John.....time to be more optimistic. Although since Q1 earnings BAC has been hit real real hard. Once the engine starts back in their favor its off to the races. Big Dick B had them at 30 by years end and in all my years, I learned that the best time to buy is when most are selling and guys like you are publishing negative words of advice. At this point this stock really has no where to go but up and you also know that the divi thing will pan out and only go up year after year. Only good things on the horizon buddy!!!!!

  • Report this Comment On May 12, 2014, at 6:43 AM, funfundvierzig wrote:

    John Maxfield, you have penned a succinct and illuminating observation on this intractably troubled and corrupt bank. Retirees can find many superior regional and community banks, where the leadership operates in a less risky fashion with a culture of ethical business practices. Historically, fraud seems to be this bank's chief tool to compete.

    Superior-managed banks with solid dividends, to take a few, are BB & T (BBT) and Glacier Bancorp (GBCI) and New Hampshire Thrift Bankshs (NHBK) ...funfun..

  • Report this Comment On May 12, 2014, at 3:53 PM, funfundvierzig wrote:

    EDITORIAL CORRECTION: The symbol for the small regional New Hampshire bank we cited is NHTB. NHTB sells for less than its book value of 15.37, and pays a dividend 52 cents, currently yielding 3.60%. ...funfun..

  • Report this Comment On May 13, 2014, at 7:56 PM, minkien wrote:

    If I could, I would get together all the analysts that write articles about a stock.

    I would I ask them a simple question, "How can be possible that 5 to 9 analysts have totally different opinions on the same stock. Some or all are going to be wrong. This is why I do not subscribe to Financial reports or listen to them. I only read the various Financial News as curiosity.

  • Report this Comment On May 15, 2014, at 7:38 PM, panamajack1 wrote:

    Buy BAC it can only go up I carry a large portion of my retirement funds in BAC. Every down day I buy more good things come to those who wait!! Any fool knows that.

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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.

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9/1/2015 10:18 AM
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Bank of America CAPS Rating: ****