Having a firm that you own cut their dividend is probably the worst thing that can happen to a dividend investor. In this case because BAC was such a small part of my portfolio (about 3%) this dividend cut barely affected my income from investments. Another factor that is really offsetting its affect is the appreciation of the U.S. dollar recently versus the Loonie. The dividends that all of my U.S. holding are paying me have become more valuable over the past few weeks. I will update my income from investments very soon.
I am holding on to my BAC shares despite the dividend cut for several reasons:
- Now would be a terrible time to sell BAC, and if I were to sell I'd sell into strength
- Because of all of the failures and consolidations in the U.S. financial industry due to the credit crisis Bank of America looks like it will turn out to be bigger and have more market share, talent, and influence in the global market which looks positive for the company going forward
- Bank of America is currently the bulk of my exposure to financials outside of Canada which I intend to maintain exposure to
- I believe the company still values dividend growth and should begin to re-grow the dividend after credit and economic conditions stabilize