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Bank of America Capital Trust Preferreds Update

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March 14, 2012 – Comments (0)

I bought at about $19, but Bank of America's capital trust preferreds are now just north of $24. They trade for about a 6.5 percent yield. One could justify selling out of these, or holding on.

BoA is not one of the stronger banks, obviously. It hasn't raised its dividend, although it passed the stress test (afaik). But it's not going bankrupt and investors realize that. Really, the capital trust preferreds had no chance of becoming impaired unless the entire bank went bankrupt.

So, are you content with a 6.5 percent yield but taking on price risk? The economy's probably recovering, but it's not out of the question that these preferreds could dip. Of course, the bank could also call them. As I said, if you own these, you could justify doing either.

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