(New throughout, adds details of plan and background)
Aug 6 Bank of America Corp said on
Wednesday the Federal Reserve has approved its plan to raise its
quarterly dividend for the first time since the financial
The bank's shares rose as much as 2.4 percent after Bank of
America said it would increase its quarterly dividend to 5 cents
per share from 1 cent.
The dividend increase is the latest step toward normality
for a bank that is still trying to move past the financial
meltdown. But the dividend would still be far below its
In 2006, Bank of America paid out about 45 percent of its
earnings as common share dividends. Based on analysts' average
forecasts for the bank's earnings for the next four quarters, it
would be paying out closer to 10 percent of its earnings as
common-share dividends under the just-approved plan.
The bank won approval to increase its dividend only after
having its prior proposals for the 2014 process rejected twice.
The Fed nixed the bank's first request because it was too high,
and its second request because the bank found a mistake in the
way it accounted for its liabilities for regulators that ended
up cutting its capital levels, or its assets minus liabilities.
In its second attempt, the bank sought to buy back another
$4 billion of shares and to spend about an extra $1.5 billion a
year on its dividend. For its third request, it only sought to
boost its dividend.
Raising the dividend has been a top priority for Chief
Executive Brian Moynihan. Prior to the crisis, the bank paid a
quarterly dividend of as much as 64 cents per share, a level
that it cut in half for the fourth quarter of 2008 and then cut
to a penny a share in 2009. Those high dividend payouts made
bank stocks a standard holding for investors seeking income from
Bank of America, like other major banks globally, was slow
to cut its dividend as the U.S. housing market crumbled, because
it did not want to signal that it was in distress. Rulemakers
responded by requiring big banks to receive regulatory approval
before paying out dividends.
In late morning trading, the bank's shares were 1.9 percent
higher, at $15.29.
(Reporting by Tanya Agrawal; Editing by Dan Wilchins, Saumyadeb
Chakrabarty and David Gregorio)