Back when the financial crisis was in full bloom I took a gamble on some of those too big to fail banks. Ironically I decided to invest in Bank of America a few days before Warren Buffet decided that picking up $5 billion worth of shares was a good idea. Back then I decided that I’m bet my yearly Roth IRA contribution on the challenged financial institution. So I picked up 1000 shares of BAC at $5.5895 a share. Looking back in time that was one of my better investment moves of my career.
I still had some cash available the following year as I didn’t have the pedal down full bore during the crisis like I now know I should have, but I did pick up 133 shares of Citibank a couple months later at $33.0198 a share in my Roth as well.
Just to round out my financial holdings I decided that picking up another financial buffet of XLF was a good idea and I picked up 64 shares at $15.53 shares to finish out the available capital in my Roth. This was the point where I figured that the worst was mostly over and that banks would be a five year plan type good investment.
I rolled over my 401k from a previous employer in 2014 and decided that I didn’t have enough exposure to the financial markets and decided to up my Citibank exposure by 150 shares at $47.249 a share. This made my total 283 shares pre-DRIP.
Fast forward to May of 2014 and with the solidifying financial positions of the banks and Warren Buffets continued belief in the Bank of America I picked up another 104 shares with the limited available funds left in my Roth at $15.15 to round out my purchased shares at 1104 that I contributed capital to, pre-DRIPping.
Now that the financial crisis is behind us and the fed is starting to raise rates I’m seeing the dividends of some well thought out contrarian investing a few short years ago. Bank of America has become the largest position within my portfolio with a share count of 1154.773 shares with dividend reinvestments. Without factoring out the DRIP cost basis I’m up an amazing 251.27% as of today on this investment. DRIP has been kind and added just over 50 shares to the pile.
Citibank similarly has been dripped, but with the higher cost basis and the longer maintained $0.01 dividend has caused this to grow much slower. Right now I’m up 64.41% on my C investment, but I’ve only added 2.856 shares to that pile due to the relatively small dividend.
Finally my smorgasbord XLF basket of stocks is up 53.49% and has added 6.478 shares since I invested, not quite BAC or C level of stellar but definitely a welcome addition to the finances.
When I wrote my last post I promised I ‘d have some pretty impressive dividend increases so now to the fun part. Last week the fed stress tested the banks and now both BAC and C have been authorized to increase their dividends, and wow have they. Starting with BAC, they have been allowed to increase their dividend by an amazing 60%! The new payout moves to $0.44 a year from $0.30, this adds $161.56 a year in additional income just from this increase.
C on the other hand has been much slower and more challenged in meeting the fed’s expectations, but this year they passed with flying colors. In fact they did so well they are increasing their dividend by 100%! The last payout was $0.16 a quarter and starting in Q3 it will jump to $0.32 a quarter. This is a significant increase and one that I wasn’t quite prepared for in receiving in such a large quantity. This adds an additional $182.40 in income per year for me. To make matters even more fun they also announced a $15.6 billion buyback authorization paving the way to even more future dividend increases.
While I can’t calculate how this will impact my XLF shares and their dividend, I can expect a few pennies more per quarter I’m sure. Nothing life changing, but it’s all the nickels and dimes that add up over time that make the difference.
Here’s hoping that the DGI group had some skin in the financial sector as I see them trying to get back to form in their payouts over the next few years and driving cash back to their shareholders to make up for the financial crisis.