Berkshire Hathaway, led by Warren Buffett, holds a substantial investment in Bank of America. Although the bank’s stock has increased approximately 36% in 2024, it remains relatively affordable in comparison to other stocks within the Dow Jones Industrial Average. Bank of America has profited from the prevailing high-interest-rate climate.
Over the last three years, the bank’s net interest income has grown roughly 30% to reach $55.7 billion. It provides its vast customer base with an interest rate of 0.04% or lower on savings deposits, contributing positively to its profits. However, as interest rates began to climb in 2022, Bank of America found itself holding a substantial amount of long-term Treasuries and alternative investments with very low fixed interest rates.
Consequently, this led to unrealized security losses amounting to $89 billion.
The Investment Landscape for Bank of America
Yet, with deposits totaling $1.9 trillion, the bank is unlikely to be forced to sell these securities at a loss.
In contrast, JPMorgan Chase adopted a different strategy by predicting higher rates and steering clear of long-term Treasury investments in early 2022. Instead, they accumulated cash, which proved beneficial as their net interest income surged by 78% over the past three years to $93.3 billion. If you’re seeking steady, dependable gains similar to those Buffett enjoys, now might be a good time to consider buying Bank of America.
The stock is yielding a 2.3% dividend at current prices and has increased its dividend payout by 44% in the last five years. While it may not be the highest performer, the chances of incurring losses over the long haul appear minimal. Before making a decision to invest in Bank of America stock, it’s crucial to clarify your investment objectives.
If you’re in search of a dependable dividend stock aligned with Buffett’s investment philosophy, Bank of America is certainly worthy of consideration.
