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What Warren Buffett Didn't Say about Bank of America's Dividend Blunder

Two weekends ago, as he does every year, Warren Buffett held court at the annual Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) shareholder meeting. Of particular interest to shareholders: What did the Oracle of Omaha think of Bank of America's (NYSE: BAC  ) latest blunder?

"That error they made does not bother me," Buffett said, referring to the bank's revelation last week that it had incorrectly accounted for financial assets inherited in its 2009 acquisition of Merrill Lynch. "You do the best you can."

Buffett's empathy is understandable. As he told CNBC's Becky Quick, "It did not affect the GAAP net worth, the GAAP earnings, or anything of that sort." Additionally, Buffett himself was confronted with an analogous issue during his brief time as Chairman of Salomon Brothers in the early 1990s.

Even more than this, however, is the simple but unspoken fact that Buffett's considerable investment in Bank of America isn't affected by the decision. Berkshire's preferred shares will continue to yield 6%. And, if anything, as Motley Fool contributor John Maxfield discusses in the following video, its warrants to purchase 700 million shares of the bank will only be a benefit, as retained earnings are considerably more accretive to future stock price than distributing the income to current shareholders.

Warren Buffett just bought nearly 9 million shares of this company
Warren Buffett is so confident in this company’s can’t-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report details this company that already has over 50% market share. Just click HERE to discover more about this industry-leading stock… and join Buffett in his quest for a veritable landslide of profits!

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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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Related Tickers

8/31/2015 4:00 PM
BAC $16.34 Down -0.02 -0.12%
Bank of America CAPS Rating: ****
BRK-A $202531.00 Down -2813.00 -1.37%
Berkshire Hathaway… CAPS Rating: ****
BRK-B $134.04 Down -1.70 -1.25%
Berkshire Hathaway CAPS Rating: *****