Investors are turning their focus to Bank of America‘s (NYSE:BAC) dividend as the lender heads into its upcoming earnings report.
Before the opening bell on Wednesday, Jan. 14, analysts expect the bank to report fourth-quarter earnings of 96 cents per share. That’s up from 82 cents per share in the year-ago period. The consensus estimate for Bank of America’s quarterly revenue is $27.62 billion (it reported $25.35 billion last year), according to Benzinga Pro.
Currently, Bank of America has an annual dividend yield of 1.99%. That’s a quarterly dividend amount of 28 cents per share ($1.12 a year). How can investors exploit its dividend yield to pocket a regular $500 monthly?
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To earn $500 per month or $6,000 annually from dividends alone, you would need an investment of approximately $300,956 or around 5,357 shares. For a more modest $100 per month or $1,200 per year, you would need $60,169 or around 1,071 shares.
To calculate: Divide the desired annual income ($6,000 or $1,200) by the dividend ($1.12 in this case). So, $6,000 / $1.12 = 5,357 ($500 per month), and $1,200 / $1.12 = 1,071 shares ($100 per month).
Note that dividend yield can change on a rolling basis, as the dividend payment and the stock price both fluctuate over time.
How that works: The dividend yield is computed by dividing the annual dividend payment by the stock’s current price.
For example, if a stock pays an annual dividend of $2 and is currently priced at $50, the dividend yield would be 4% ($2/$50). However, if the stock price increases to $60, the dividend yield drops to 3.33% ($2/$60). Conversely, if the stock price falls to $40, the dividend yield rises to 5% ($2/$40).
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Similarly, changes in the dividend payment can impact the yield. If a company increases its dividend, the yield will also increase, provided the stock price stays the same. Conversely, if the dividend payment decreases, so will the yield.
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