Bank of America Corporation (NYSE:BAC) currently offers an annual dividend yield of 2.6%. That’s a quarterly dividend amount of 26 cents per share ($1.04 a year).
To earn $500 monthly from the Charlotte, North Carolina-based firm, start with a yearly target of $6,000 ($500 x 12 months).
Next, we take this amount and divide it by Bank of America's $1.04 dividend: $6,000 / $1.04 = 5,769 shares
So, an investor would need to own approximately $230,587 worth of Bank of America, or 5,769 shares to generate a monthly dividend income of $500.
Assuming a more conservative goal of $100 monthly ($1,200 annually), we do the same calculation: $1,200 / $1.04 = 1,154 shares, or $46,125 to generate a monthly dividend income of $100.
Note that dividend yield can change on a rolling basis, as the dividend payment and the stock price both fluctuate over time.
The dividend yield is calculated by dividing the annual dividend payment by the current stock price. As the stock price changes, the dividend yield will also change.
For example, if a stock pays an annual dividend of $2 and its current price is $50, its dividend yield would be 4%. However, if the stock price increases to $60, the dividend yield would decrease to 3.33% ($2/$60).
Conversely, if the stock price decreases to $40, the dividend yield would increase to 5% ($2/$40).
Further, the dividend payment itself can also change over time, which can also impact the dividend yield. If a company increases its dividend payment, the dividend yield will increase even if the stock price remains the same. Similarly, if a company decreases its dividend payment, the dividend yield will decrease.
Price Action: Shares of Bank of America fell by 0.6% to close at $39.97 on Thursday.
The firm will release earnings results for its third quarter before the opening bell on Tuesday, Oct. 15,
Analysts expect Bank of America to report quarterly earnings at 77 cents per share. That’s down from 90 cents per share in the year-ago period.
Bank of America projects to report revenue of $25.29 billion for the recent quarter, according to data from Benzinga Pro.
On Oct. 9, RBC Capital analyst Gerard Cassidy reiterated Bank of America with an Outperform and maintained a $46 price target.
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