Bank of America Corp. plans a "modest" increase to its dividend in the second half of this year, pending approval by the Federal Reserve.
The Charlotte, N.C., bank acknowledged in its annual report filed with the Securities and Exchange Commission Friday that it made a request to raise the dividend in its capital plan filed with the Fed. The Fed's decision is expected later in March.
B of A has hinted at a possible dividend increase before, but this was the most concrete sign yet that shareholders could soon see bigger returns.
Brian Moynihan, the bank's chief executive, said last month that he believed the bank was "in a position" to raise the quarterly dividend from the current penny-per-share payout, but did not indicate that the bank had made a formal request to regulators. The bank has paid out a total of 8 cents in dividends over the past two years, down from $2.24 in 2008.
Some analysts believe B of A has a good chance of winning Fed approval. In a note to investors Friday, FBR Capital Markets analyst Paul Miller wrote that "Bank of America will be the biggest beneficiary" of the stress tests "given our expectation the company should be able to pay a dividend, contrary to street expectations."
He added: "Large banks screen as relatively better capitalized than the regional banks as a percentage of tangible book value, especially considering the amount of (Troubled Asset Relief Program funds) still outstanding at the regionals. Even after accounting for higher reserving standards for the big banks with large credit card operations and higher capital standards, for banks with relatively significant capital markets and trading revenue, the big banks still screen as better capitalized."
