Bank of America: Buffett Wins Again

Bank of America: Buffett Wins Again

This allows Buffett to capitalize during tough economic times, or to "be greedy when others are fearful", as he's said.

After all, it would be a more lucrative deal. That means the common stock would yield $36 million more a year than $300 million annual dividend Buffett has received on the preferred stake.

The billionaire will exercise several warrants obtained six years ago that were a vote of confidence in the bank while its shares were tumbling during probes from the housing meltdown of 2007-2008. This was very intentional. In exchange the financial giant gave preferred stock and the right to buy 700 million, which is now worth about $17 billion.

The Federal Reserve's Comprehensive Capital Analysis and Review was been good for Bank of America (BAC). (AAPL) and Bank of America Corp.

If Omaha-based Berkshire made the swap now, it would have a paper profit of about $12 billion and begin collecting $336m of annual dividends, on top of roughly $1.7 billion of dividends already paid. This indicates that the bank's management still sees its stock as an attractive value.

Before his February letter, Mr. Buffett had said he would wait to exercise the warrants, which expire in 2021.

This week, we got a glimpse into Buffett's first-ever tax and earnings statement, from 1944.

Why did Buffett care about a $0.44 dividend threshold?

Shares have soared along with its peers in recent days as big dividend hikes were promised by the bank sector as almost all its members passed the latest USA central bank stress test easily.

To be clear, I'm not saying Buffett is necessarily going to make the conversion immediately.

Bank of America said it would make the dividend increase official "beginning in the third quarter of 2017".

Related Articles