With this development, Buffet has nearly tripled the return of investments he made 6 years ago.
In a significant development, Warren Buffett’s Berkshire Hathaway Inc, is on the verge of becoming the largest shareholder of Bank of America Corp.
On Wednesday, the bank raised its annual dividend to 48 cents from 30 cents, following a positive assessment of its ability to handle market stresses.
According to Buffet, a boost of this size would in most probability result in Berkshire’s swapping its preferred shares in the bank into common shares, now worth about $16.7 billion.
Berkshire did not immediately respond to requests for comment.
Such an exchange would make Berkshire the largest shareholder of both Bank of America and Wells Fargo & Co and would triples its return on investments on $5 billion it made six years ago.
The move also signals Buffett’s confidence in Bank of America’s CEO, Brian Moynihan.
Moynihan has worked hard to restore investors’ confidence in the bank and has spent $70 billion since the 2007-2009 global financial crisis, to resolve legal and regulatory matters, which largely stem from its purchases of Countrywide Financial Corp and Merrill Lynch & Co.
“Buffett has said he is very happy with what Moynihan’s doing, and it’s easy work for him to get more dividends,” said Bill Smead, whose $1.16 billion Smead Value fund includes shares of both companies. “For Bank of America, it would mean a further endorsement by the most spectacular large-cap stock picker of all time.”
As per Forbes magazine, Buffett’s net worth is $76.1 billion.
The hike in dividend required the approval from the Federal Reserve.
On Wednesday, the Fed had approved Bank of America’s $12 billion stock buyback plan along with 33 other large U.S. banks.