Warren Buffett’s Berkshire Hathaway has a significant stake in Bank of America. The bank’s stock has risen about 36% in 2024, but it still looks inexpensive compared to other stocks in the Dow Jones Industrial Average. Bank of America has benefited from a higher-interest-rate environment.
Its net interest income has risen about 30% over the past three years to $55.7 billion. The bank offers its huge customer base an interest rate of 0.04% or less on savings deposits, which has helped boost profits. However, when interest rates started rising in 2022, Bank of America was holding a lot of long-term Treasuries and other investments that pay a very low fixed interest rate.
This resulted in $89 billion in unrealized security losses.
Bank of America’s investment environment
But with $1.9 trillion in deposits, it’s unlikely the bank will need to sell those securities at a loss.
JPMorgan Chase took a different approach by anticipating higher rates and avoiding investing in long-term Treasuries early in 2022. Instead, it hoarded cash, which paid off as its net interest income soared 78% over the past three years to $93.3 billion. If you’re interested in steady, reliable gains like Buffett enjoys, Bank of America could be a smart buy now.
The stock offers a 2.3% dividend yield at recent prices and has raised its payout by 44% over the past five years. While it might not be a top performer, the odds of losing money over the long run seem low. Before deciding whether to buy Bank of America stock, it’s important to understand your investment goals.
If you’re looking for a reliable dividend stock backed by Buffett’s investing philosophy, Bank of America is worth considering.
