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Friday, 06/27/2003

Bank Shot - Corner Pocket
By Nich Sheldon
BAC - Bank of America Corporation

Company Description

Bank of America Corp. is a bank and financial holding company. Through its banking subsidiaries and various non-banking subsidiaries, the Company provides a diversified range of banking and non-banking financial services and products, primarily throughout the mid-Atlantic, including Maryland, Virginia and the District of Columbia; the Midwest, including Illinois, Iowa, Kansas and Missouri; the southeast, including Florida, Georgia, North Carolina, South Carolina and Tennessee; the southwest, including Arizona, Arkansas, New Mexico, Oklahoma and Texas; the northwest, including, Oregon and Washington; and the west, including California, Idaho and Nevada, and in selected international markets. The Company operates in four business segments: Consumer and Commercial Banking, Asset Management, Global Corporate and Investment Banking and Equity Investments.

[Source: Company Website]

Reasons to Invest:

The banking Index (BKX.X) has been on a rampage since last March, charging from as low as 657 (March 12th, 2003) to 897 points on June 16th. One of the stocks that have helped to urge this 240- point move is Bank of America Corporation (NYSE:BAC). Not only has BAC helped the BKX find its stronghold, but also they rank in the top 25% of the sectors most bullish stocks. Furthermore they also offer a drip reinvestment plan that is almost too good to pass up. Currently Bank of America yields a handsome dividend of 4.05% and they also offer an annual dividend of $3.20. If this is not reason enough to write up BAC their quarterly results may help to provide further conviction.

For the first three months of this year interest income for BAC fell 2% to $7.73 billion. On the other hand their net interest income after LLP rose 1% to $4.38 billion. The net income applicable to common also rose 11% to $2.42 billion which is a direct reflection of lower average rates on earning assets, offset by decreased cost of funds. BAC noted a 1.48 earnings estimate for the first quarter, which actually totaled out to be 1.59. The surprise percentage on this was 7.4%. Keep in mind the second quarter has just ended and BAC is estimating 1.57 for earnings. This is a good sign for the future of this banking giant as they have beaten their estimates for more than four consecutive quarters.

To top that off their Board of Directors announced a quarterly dividend increase of 25% on June 25th, 2003. They noted that the dividend is payable on September 26th to shareholders of record on September 5. This dividend increase is huge for BAC shareholders as it provides individuals with the flexibility to decide whether to use their share of BAC's profits for spending or reinvestment.

A quick look at the current broker recommendations and one will soon find that BAC is backed by nine strong buys, eight buys, and nine hold ratings. There is not a broker recommending selling or noting a strong sell at this point in time. This should help to encourage those traders who are thinking about BAC as a strong possibility for investment. These rating recommendations are partly due to Bank of America Corp.'s expected 12.1% earnings growth. In comparison to the industries 14.1% earnings growth estimate, one can see that BAC is among the top bankers in the sector.

Bank of America Corp also cut their rates to 4% from 4.25% on June 26th following the Fed's decision to cut its key federal funds rate for overnight bank lending to 1% from 1.25%. The Fed funds rate is now at its lowest percentage since July 1958. This is BAC's first cut since November 6th, 2002.

With all of this in mind, we here at are mind boggled at how impressive this DRIP is setting up to be. We feel that if a company is secure enough to boost their dividends and not lean on offering buybacks to its investors, then traders should jump on this with both feet forward. The bottom line is that with a dividend yield of 4.05% and the quarterly dividend increase of 25% BAC is a solid choice for drip investors who have been following the 200+ point move in the banking index.

Until Next Week,
Nich Sheldon

DRIP Information:

Shares to Qualify = 1
Auto-reinvestment = Yes
Accept Foreign Accounts: Yes
Temper Enrollment Serv:  Yes

Min/Max Investment = $50 to $120,000/year

Reinvestment Fees - 

Dividend investment fees: none
Cash investment fees: none
Auto reinvestment fees: none

Transfer Agent:

Mellon Investor Services LLC
P.O. Box 3315
South Hackensack, NJ 07606-1915
Toll free phone number: 1.800.642.9855
Hearing Impaired phone number: 1.800.231.5469
Foreign shareholders phone number: 201.329.8660


Copyright 2003

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