Linked here is a PDF copy of my detailed analysis of Bank of America Corporation (BAC). Below are some highlights from the above linked analysis:
Company Description: Bank of America Corporation is a financial holding company providing banking and nonbanking financial services in the United States and internationally.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description: 1.) Avg. High Yield Price, 2.) 20-Year DCF Price, 3.) Avg. P/E Price and 4.) Graham Number. BAC is trading at a discount to three of the four valuations listed above. If I exclude the high and low valuation, and average the remaining two valuations, BAC is trading at a 12.8% discount. BAC gets a Star for being fairly valued.
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description: 1.) Rolling 4-yr Div. > 15%, 2.) Dividend Growth Rate, 3.) Years of Div. Growth, 4.) 1-Yr. > 5-Yr Growth and 5.) Payout 15% of avg. BAC only earned one Star in this section for 3.) above - it has grown dividends for 10+ years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description: 1.) NPV MMA Diff. and 2.) Years to >MMA. BAC earned Stars for both 1.) and 2.) above.
Other: BAC has seen recent growth in its online business which has helped to improve operating efficiencies. With the acquisition of U.S. Trust, BAC looks to expand more into the highly profitable private banking business. Mostly as a result of the sub-prime crisis, BAC current valuation offers a sporty yield of 5.93% (as of 11/25/07).
Conclusion: BAC earned one Star in the Fair Value section, one Star in the Dividend Analytical Data section and two Stars in the Dividend Income vs. MMA section for a total of Four Stars which rates it as a 4-Star Buy.
Disclaimer: As always this is only my opinion and you should not rely on it. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I own shares of BAC.
What are your thoughts on BAC?
Recent Stock Analyses:
Popular Posts - Last 7 days
The difference between an income investor and a dividend growth investor is time and the understanding of how compound growth works. If you...
Linked here is a detailed quantitative analysis of Wells Fargo & Company (WFC). Below are some highlights from the above linked analysi...
Each Sunday I highlight any notable articles that I came across over the past week. Though I may not always agree with each of the articles ...
Linked here is a detailed quantitative analysis of Kimberly-Clark Co. (KMB). Below are some highlights from the above linked analysis: Co...
Most casual income investors focus on current yield, which is important. However, if your objective as an income investor is to build a port...
Presented below are my dividend stock and ETF/CEF holdings. This is not a recommendation to buy these securities. I have classified some of...
Linked here is a detailed quantitative analysis of McDonald's Corporation (MCD). Below are some highlights from the above linked analys...
Monday, October 31, 2011 will mark my fourth full year of writing as Dividends4Life . It is hard to believe another year has passed. Like th...
Like many that came before me, I am on a journey to construct a portfolio that will provide me... Dividends 4 Life
How much money will you need for retirement ? This a very difficult question to answer. There are many factors and assumptions that go into ...