BB&T Corporation Message Board

  • onesigmavariation onesigmavariation Apr 9, 2009 2:06 PM Flag

    Dividend Cut Will Boost BBT's Price

    The market is smart and knows BBT cannot sustain its $0.47 quarterly dividend. Most analysts have next weeks Q1 earnings at $0.32. CEO King will lay the ground work for a cut on the CC. I expect the new dividend will be $0.25 and that will add about $250M in equity without dilution of existing shareholders. Such a move will boost the shares into the 20 - 25 dollar range as the market rewards prudent management moves. Real estate in Washington DC, a prime BBT market, is improving but King will caution that the Atlanta and Florida markets are troubling. Listen carefully on what he says about consumer loans. He singled out high unemployment as a threat to their credit card account on the last CC. The 5% spread on cost of funds and loans is working wonders for those banks that can find qualified borrowers.

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    • I agree that dividend cut to .25 would cause stock to rise to 20 - 25 area because it is already discounted to go to .10; however, I don't believe it will happen.

      I believe the more likely scenerio is for maintaining current .47 with eps more than covering it. Once it is clear that dividend will nor be cut -- stock will rise to 40 - 50.

    • Another clueless poster. DC is a relative small part of BB&T's total market. Atlanta is bigger, but Va an NC are much larger. BB&T is not into the whole state of Fla, either (mostly in northern Fla).

      Over all the parts of BB&T's market that have "big" problems are probably 20-25% or less of their total market. Yet clueless people like you try to make it sound like it is a much larger share of their market and business.

      This is not to discount the effect of these "bad" markets. Still BB&T has used very conserative underwriting and therefore is not realizing the losses on the same scale as a lot of their competetion and to try and make that comparsion is deceitful.

      As to cutting the dividend - long term it will not help the price. BB&T has many people owning a sizable per cent of its stock who depend on the dividends for income. If they cut the dividend more than a token amount then these holders will have to re-evaluate whether they can afford to hold BB&T stock and over time they will look for and find alternatives to a bank that does not pay a good dividend.

      You analysis is shallow and lacking.

      • 2 Replies to inlet_boater
      • BB&T is fully aware that 65% of its shareholders are "retail". They want to keep the 37 years of increasing dividends in tact, but must wait on things like the stress test details that they will not get until end of April. It is not a given that they will cut dividend but they are under pressure to look hard at it.

      • No, actually he makes sense, as you rarely do. A dividend cut would signal to the market that Mgmt is realistic and not adhering to its Pavlovian dividend policy. The market has already priced in a dividend cut, a long time ago, it just hasnt come, and it makes sophisticated investors wonder if Mgt is really smart enough to make key strategic decisions (that's why the price is stil in the teens). In the short term, a sell-off would be covered by institutions and be short-lived. Remember dummy, its easy to do nohting, it takes brains to actually make a strategic decision and be accuntable for it. Stick with a 30 year old strategy because (a) that's all you know and (b) is "what we've always done", does nothing to instill confi.

 
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