Marty Fridson is leading expert on dividend strategies and the editor of Fridson/Forbes Income Securities Investor; for a top pick for 2023, he looks to a preferred issue with floating rates.
Bank of America Corp. (BAC) is a leading worldwide financial institution, providing Commercial and Retail Banking, Corporate & Investment Banking, and Asset and Wealth Management.
Our recommendation — Bank of America Corp. 4.00% Floored Floating Rate Non-Cumulative Preferred (BML-L) — recently had an indicated yield around 5%. It’s rated investment grade at Baa3/BBB- with positive outlooks from both Moody’s and Standard & Poor’s.
This 4.00% preferred issue has a floored, floating-rate structure. With LIBOR completely phasing out after June 30, 2023, the dividend rate will remain floored at 4.00% indefinitely.
The issue is callable on any dividend payment date at par plus declared and unpaid dividends. But it’s unlikely to be redeemed at par anytime in the near future, as the structure provides BAC cheap regulatory capital.
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