Are the big money guys second guessing BB&Ts dividend comment? Nice pop on the announcement only to end flat. Tomorrow should be interesting!
If profits are in trouble (bad loans, write downs, etc.) and they continue to pay or even raise a dividend, this would lower earnings.
Or, if they actually have to cut despite todays announcement, then profits will be better off, but investor confidence shot.
The only positive outcome would be that they are WAY better off then anyone expects. Able to pay or increase the dividend while meeting or beating earnings estimates. Anyone here think that is the case?
It would not be a first if BB&T said they were ok and not cutting dividend and did just the opposite. MANY banks if the past few weeks have made such announcements only to do exactly what they said they weren't going to do. I'm not saying that is going on here, only that it wouldn't be a shocker if todays announcement was a PR move to help a stock down almost 11%.
I personally don't buy it. Show me more BBT, show me something come earnings next month.
Dividends are paid out of earnings, they do not reduce earnings, but reduce retained earnings. Cutting the dividend, leaving it the same, or raising it do not affect earnings (just retained earnings).
Corporations are prohibited from issuing PRs to simply impact stock price. It is illegal and would cause multiple lawsuits also. PRs have to be factual and true as to the current situation.
Bad loans get written off against reserves not earnings. Having to increase reserves may lower earnings. Writedowns/writeoffs seem unlikely given BBT is not into CDOs, SIVs, etc where many banks and financial instutions (ie AIG) have gotten burnt and taken these actions.
Finally, yes they may beat but if they do it will be by a penny or two. It all depends on how much they have to add to reserves.
This bank is in very good shape. A lot of their market area (NC, VA) has been stable for real estate and developers. So I expect an in line earnings report (estimates +/- 2 cents).
It was down 10% and rallied to just into the plus column on huge volume... This means retail and hedge funds sucked up any pre div boost announcement order flow....long only funds don't get in that quick...they have to have meetings and talk it over, etc.... they will be in tomorrow and the subsequent days and the selling pressure is likely off....
Also, up slightly was a lot better than many other regionals fared today.....
I agree with everything that you said. Some anaylst on the internet lowered his expected target to 21 and predicted 2009 earnings at 3.20. seems to be spitting out of both corners at the same time. TennCPA