#2:news Buy Bank of America's Dividend Now, Enjoy Its Growth Later

thestreet.com - #2:news Buy Bank of America's Dividend Now, Enjoy Its Growth Later
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nbc news Bank of America, the world's fifth-largest bank by market capitalization, pays a 5 cent quarterly dividend that yields 1.12% annually based on the stock's current value of around $18 per share. Investors of
record as of Dec. 4 can expect their dividends to hit their brokerage accounts on Dec. 24. This amounts to roughly three weeks from the ex-date -- a relatively short period of time to wait, if you're buying BAC stock just for its dividend.

Right away, I will concede that Bank of America's dividend yield, which is some 80 basis points below the average dividend payer in the
S&P 500 (SPX) index, is not breathtaking. This will mark the seventh consecutive quarter of the bank holding steady on a 5 cent payout. But the bank's long-term growth prospects more than make up for the shortfall in its yield.

Consider, for the quarter ending in December and fiscal 2015, Bank of America's earnings per share are projected to surge 40% and 300%, respectively. Analysts' average earnings projection is for 35 cents a share in the December quarter and $1.44 a share for the fiscal year. This would indicate that the bank's efforts to offset the weaker parts of its business, such as mortgage originations, are delivering solid earnings results.

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And here's the thing: Like most banks, Bank of America has been suffering due to the low-interest rate environment, which has pressured its revenue and diminished its ability to make money on banking fees. That's about to start changing, however, if we can believe

 recent statements from Fed Chair Janet Yellen.

The Fed's September and October meetings came and went with no changes to interest rates. But it's now a matter of when the Fed will takes action, not if. And that bodes well for Bank of America shares, which are down 2.26% on the year and trading at a P/E of 13 -- a huge discount to the S&P 500 (P/E of 21), and also a marginal one when compared to the

Financial Select Sector SPDR Fund (XLF) (P/E of 14).

What's more, at its current stock price of around $17.50, BAC trades some 20% below its last

reported book value of $21.91 per share. In other words, if all of the bank's assets were consolidated (minus liabilities), the bank would be priced at almost $22 per share. This explains why the stock has a consensus buy rating and an average analyst 12-month price target of $19, some 8% above current levels.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.