Shareholders of Bank of America (NYSE:BAC) may soon get a raise. According to analysts at Markit Group, the nation's second largest bank by assets is expected to increase its quarterly payout by a factor of five at the end of next month.
The move is contingent on Bank of America's performance in the Comprehensive Capital Analysis and Review (CCAR) program that's administered each year by the Federal Reserve. Under the process, the central bank has binding authority to approve or reject the capital allocation plans of the nation's biggest banks.
Bank of America's history with the CCAR has been varied. In 2011, it requested a dividend increase but was denied. In 2012, it didn't seek permission to return any capital to shareholders. And in 2013, it asked to repurchase $5 billion in common stock and $5.5 billion in preferred shares and was approved.
From this progression, it seems reasonable to conclude that a dividend increase could be imminent. Added to this, is the fact that the Charlotte-based bank has continued to increase its profitability and boost its capital base over the last few years.
At the same time, however, analysts have been wrong in predicting this on more than one occasion over the last few years.
Two years ago, Dick Bove, then an analyst at Rochdale Securities, said that Bank of America would increase its dividend even though the bank said it wouldn't. An analyst at Stifel Nicolaus said the same thing, going so far as to build a three-cent increase into his model. And last year, I was all but certain that the bank would finally make the move.
Will Markit Group be right this year? I hope so. But either way, we'll find out sooner rather than later, as the Federal Reserve is set to announce the results sometime in March -- last year, it did so on March 14th.