Bank of America Corp Halts Dividend Increases; Suspends $4B Buyback Program (BAC)

Bank of America Corp (BAC) released devastating news today as far its stock is concerned. The company will be forced to suspend its buyback program and dividend raises after it was discovered that the bank’s capital levels are lower than previously thought.

To be clear, the firm will continue to pay out a dividend of $0.04 per share, but will not be able to raise that payout as it previously wished to do. The error was attributed to an incorrect calculation regarding some key metrics dating back to its acquisition of Merrill Lynch.

This news comes just weeks after investors cheered the news that the company’s capital plan was approved by the Federal Reserve. That plan included a $4 billion buyback and a 25% increase to its quarterly dividend. Due to the material change this miscalculation has brought up, the company will be forced to re-submit its capital plan to the Fed before it can commence any action regarding dividend raises.

Though its dividend is quite minor, the news that the company is forced to suspend payouts and buybacks reflects very poorly on the stock, especially in a very scrutinized space. Just weeks ago, Citigroup (C) was put through the ringer after its capital plan was rejected by the Fed; its stock dropped 6.3% the day of the announcement.

BAC fared little better today, as it dropped $1.00 or 6.27%. This drop came on volume of more than 340 million shares, more than three times the average daily volume for the stock. Investors may want to note that C has yet to recover from its capital plan failure, suggesting BAC may have a few tough trading weeks ahead, barring any unexpected news.

BAC Dividend Snapshot

As of Market Close on April 28, 2014

Click here to see the complete history of BAC dividends.