Buffett's Berkshire to Become Bank of America's Biggest Holder

01 July, 2017, 00:59 | Author: Franklin Nunez
  • Berkshire Hathaway Chairman and CEO Warren Buffett is interviewed in Omaha Neb. Buffett's Berkshire Hathaway is buying 700 million shares in Bank of America making Buffett the largest shareholder in two of the nat

"If the dividend rate on Bank of America common stock - now 30 cents annually - should rise above 44 cents before 2021, we would anticipate making a cashless exchange of our preferred into common". The preferred shares pay a 6 percent annual dividend, or $300 million.

Warren Buffett's Berkshire Hathaway is buying 700 million shares in Bank of America, making Buffett the largest shareholder in two of the nation's largest banks.

In addition to now being the largest shareholder in Bank of America, Berkshire Hathaway is also the largest shareholder of Wells Fargo.

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Shares have soared along with its peers in recent days as big dividend hikes were promised by the bank sector as almost all its members passed the latest USA central bank stress test easily. Shares jumped from $7.14 a share six years ago to $24.32 per share on Thursday. (AAPL) and Bank of America Corp.

The Warren Buffett-owned company plans to make the purchase at below-market prices through warrants that expire in 2021.

The Oracle of Omaha first got involved with the Charlotte-based banking giant back in 2011, when investors began questioning whether Bank of America could deal with legal fees and liabilities stemming from the subprime mortgage crisis.

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At Bank of America's current share price, the stake would hand Berkshire a tidy $11.7 billion profit, at least on paper. Mr. Buffett has said a dividend of this size would prompt his company to swap its preferred shares into common stock.

Bank of America said it would make the dividend increase official "beginning in the third quarter of 2017". In the early years of the test, the bank struggled to get a clean approval for such capital-return hikes from the regulator.

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