Will Bank of America Raise Its Dividend in 2020?

Even after more than a decade, investors remember all too well how scary the financial crisis was. Huge banks like Bank of America (BAC -1.07%) found themselves on the brink of collapse, and it ended up taking extraordinary measures to ensure that the global financial system wouldn't simply stop functioning entirely. BofA in particular saw its stock take a huge hit, and even now, it still hasn't fully recovered from the declines its share price suffered.

Dividend investors haven't been entirely comfortable with Bank of America, either. Despite a nice rebound in its quarterly payouts, the company still lags well behind where it was before the crisis when it comes to the size of its dividend payments. Yet that hasn't stopped the banking giant from working on a full comeback, and below, we'll look more closely at whether Bank of America will keep raising its dividend in 2020.

Dividend stats on Bank of America

Data Source: Yahoo! Finance. Last increase refers to ex-dividend date.

Trying to win back its former dividend glory

Before the financial crisis, Bank of America was a superstar among dividend stocks. As a Dividend Aristocrat, BofA had gone a quarter century delivering dividend increases each and every year. It had even weathered difficult conditions like the tech bust in 2000 through 2002 and emerged bigger and stronger. By 2007, Bank of America was paying investors $0.64 per share each quarter.

Yet when the financial crisis hit, it brought BofA to its knees. A 50% haircut on the dividend payment turned out to be just the beginning, and Bank of America eventually had to slash its payout all the way to just $0.01 per share. The dividend stayed there for five long years.

BAC Dividend data by YCharts.

Then in 2014, BofA finally got permission from the Federal Reserve to push its dividend all the way up to $0.05 per share. Annual increases ensued, and the most recent increase to $0.18 per share earlier in 2019 represented a 20% hike from previous levels.

Can Bank of America raise its dividend in 2020?

As much as dividends have increased at Bank of America in recent years, the bank has really concentrated on returning capital to shareholders through stock buybacks. In mid-2019, Bank of America said it would return $37 billion to its investors, and nearly $31 billion of that will come from repurchasing shares of BofA stock. Bank executives have said that the dividend will need to take lower priority, in large part because the bank doesn't want to have to cut its payout again in the future.

Image source: Bank of America.

Bank of America's fundamental prospects look good. Deposit and loan growth helped boost its consumer banking segment, and investment banking was a big winner for it. Despite weakness in trading-related revenue, asset quality for Bank of America stayed attractive. Even fears of a possible recession aren't putting too much cold water on investor enthusiasm for the banking giant.

Most investors are looking for earnings to rise around 10% next year. That would suggest that a $0.02 per-share increase to $0.20 per share every quarter would be in line with that fundamental growth. An 11% increase would mark a slowdown from recent dividend growth, but it's also more likely to ensure that BofA can rebuild its track record for dividend excellence.