Here's Why Bank of America's Dividend Is So Safe

Here's Why Bank of America's Dividend Is So Safe

Banks have a tendency to cut their dividends when times get tough. But even if the economy were to turn down, there's little reason to think that Bank of America (NYSE: BAC) would find it necessary to do so.

The reason is that its dividend payout ratio is very modest. Over the past 12 months, Bank of America has paid out only 18% of its earnings to shareholders, leaving it a wide margin of safety even if its net income were to take a hit.

You can get a sense for the size of this margin by comparing Bank of America's payout ratio to its competitors, the three other megatrillion banks: JPMorgan Chase (NYSE: JPM), Wells Fargo (NYSE: WFC), and Citigroup (NYSE: C).

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Source: Fool.com