Despite CEO’s assurances, BofA’s dividend gets the ax

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Bank of America Corp. CEO Ken Lewis kept assuring shareholders for most of this year that their dividend was safe.

No, it wasn’t.

BofA today joined the long list of banks that have slashed their payouts as they try to conserve precious capital.

The Charlotte, N.C.-based giant cut the quarterly dividend to 32 cents a share from 64 cents as it reported a 68% plunge in third-quarter earnings.

‘These are the most difficult times for financial institutions that I have experienced in my 39 years in banking,’ Lewis said in a statement.

‘We know many investors in our stock are quite disappointed with a dividend reduction,’ he said. ‘It is not a decision we made lightly. However, we cannot pay out what we have not earned. Our goal is to resume dividend increases from the new level as soon as our earnings performance warrants.’

All fair enough. But Lewis sounded way too optimistic to me in early July, when he came to The Times for an interview.

‘Given our view of things, we do not expect to cut the dividend nor do we expect to have to raise capital,’ he said then.

‘We get investors and analysts calling us saying, ‘You’ve got to cut your dividend because the market is saying you should cut your dividend.’ We’ve reminded them that the market over the short term is not always right.’

Not always, but certainly this time it was.

BofA’s shares closed at $32.22, down $2.26, in regular trading today, then tumbled to $28.95 after hours, following the earnings report and dividend announcement. The company also said it would raise $10 billion by issuing new shares.

Still, those who bought the stock in early July because of Lewis’ optimism about the dividend would have paid $21 to $24 a share -- so they’re still in the black for the moment, even if they won’t be getting the income they had expected.