A couple weeks ago I glanced through the prospectus for Wells Fargo' warrants from the TARP.
I am not a financial advisor, however it appears that in 2018 Wells warrants are exerciseable at $34
The part I never saw until recently is that Wells Fargo' dividend, once it reaches $1.34, will start to impact the excise price.
For example, if in 2017, the dividend is ten cents more than $1.34 then the excise price of $34 is lowered by that same ten cents.
Dont quote me on the above, I am not sure if it is correct way understanding of the Warrants.
However if it is true it can lead one to forcost a steady path of dividend increases toward $1.34 from the $1 we are now presently at. In other words an annual increase of $.06 in the dividend annually.
Since dividend increases are a topic frequently written about in the press and by analysts, one would think if my understanding were true someone else would have mentioned it, which leads me to fear my cursory glance of the prospectus has led me to faulty thinking and is off base.
Mr. Schnider, what is your thoughts on the warrants that have been issued in general. I think you are correct in your statement about the dividend and exercise price. I have studied some of the warrants and there seems to be some excellent opportunities in bank warrants and non bank warrants
Mr. Schnider, the comment I read about all warrants, "One interesting aspect of these warrants is that they have dividend protection. As the dividend rises above a certain threshold, the strike price of the warrants is adjusted down. The threshold is different for each instrument."
Value Line Investment Survey that I read at the local library is predicting that WFC will be paying out about $1.80 in divs by 2015-17. The report is dated Nov 16, 2012 and its projections so far have been conservative. WFC is my biggest holding at this time and I am still accumulating when the share price dips. My spring target price is $38 plus.