Bank of America's Preferred Dividend Payments: A Tactical Play on February 27

The immediate catalyst is a specific, near-term payment date. Bank of America has announced that the Board of Directors has authorized dividends for its floating-rate preferred shares, with a clear record date of February 27. This is the event that sets the tactical play in motion. For investors in Series F and G, this date marks the cutoff for receiving the next dividend payment.

These are reset-rate preferreds, meaning their yield is not fixed but resets periodically based on a benchmark. The terms show they are tied to 3-month CME Term SOFR plus a spread. This is critical: the actual dividend amount paid on March 16 (the payment date) will be determined by the SOFR level set in the week leading up to the record date. The setup is therefore sensitive to short-term interest rate movements.

The investment context is straightforward. Buying these shares just before the record date locks in the right to receive that upcoming dividend. The goal is to capture yield ahead of the ex-dividend adjustment, which typically causes the share price to drop by roughly the dividend amount. The February 27 record date creates a clear window for this tactical move.

The Mechanics: Price Action and the Ex-Dividend Setup

The tactical play hinges on a predictable market pattern. Preferred stock prices typically trade ex-dividend, meaning they drop by roughly the dividend amount on the record date. This is the standard adjustment that ensures the buyer of the stock on that day does not receive the payment. For Series F and G, the record date is February 27. The setup is clear: buy the shares before that date to lock in the right to receive the dividend, then expect the price to adjust downward on the record date.

This creates a specific window for a tactical move. An investor buying Series F or G shares just before February 27 captures the full dividend payment, which is scheduled for March 16. The goal is to profit from the yield without bearing the full cost of the stock for the entire period. The risk is that the price may already reflect the dividend expectation, compressing the potential gain. The payoff is the dividend itself, which is substantial-$1,096.20250 per share for each series.

The complexity of multiple payment dates across February and March introduces a potential source of temporary mispricing. With dividends being paid for various series on different dates in those months, traders will be adjusting positions to capture specific payouts. This can lead to short-term volatility and price dislocations in individual series as market participants buy ahead of record dates and sell after the ex-dividend adjustment. For Series F and G, the concentrated payment date of March 16 following the February 27 record date provides a cleaner, more predictable event for this strategy.

The Immediate Risk/Reward Setup

The trade offers a clear, near-term reward: a substantial yield pickup. For Series F and G, the dividend is $1,096.20250 per share, paid on March 16. The goal is to capture that full payment by buying before the February 27 record date. The risk is that the event's mechanics can work against you.

The primary risk is a move in the benchmark interest rate that resets the dividend lower just before the payment. These are reset-rate preferreds tied to 3-month CME Term SOFR plus a spread. The actual rate paid on March 16 is determined by the SOFR level set in the week leading up to the record date. If SOFR falls sharply in that window, the dividend payment will be lower than expected, reducing the effective yield for the trade. This is a direct, event-driven risk that can alter the outcome.

A secondary, longer-term risk is the callability of many preferred shares. The table shows Series F and G are non-cumulative and callable on or after their issue date (March 15, 2012). While not likely to be called soon, this feature means the bank can force a refinancing if interest rates move against it. This introduces uncertainty about the long-term value of holding these securities beyond the immediate dividend capture.

The bottom line is that this is a tactical, event-driven play, not a long-term hold. The position should be managed around the payment date. The reward is the dividend itself, but the trade hinges on the rate reset and the price adjustment. Any misstep in timing or an unexpected rate move can compress the gain.

What to Watch: Catalysts and Guardrails

For this tactical play, the setup is clear, but success depends on monitoring specific triggers. The primary catalyst is the rate reset itself. The dividend paid on March 16 for Series E, F, and G is determined by the 3-month CME Term SOFR plus a spread set in the week leading up to the record date. Therefore, the most critical watchpoint is SOFR levels in that final week. A sharp drop in SOFR would directly lower the dividend payment, reducing the effective yield for the trade. Conversely, a rise would boost it.

Next, monitor the price action of these specific series in the days before and after February 27. The market should correctly price the ex-dividend drop on that record date. If the price adjustment is less than the dividend amount, it signals a potential mispricing opportunity. If it's more, the trade may be arbitraged away. This real-time check confirms whether the market is efficiently discounting the dividend.

Finally, track broader bank stock performance and Treasury yields. These provide context for the relative appeal of preferred income. If bank stocks are rallying on strong earnings or rate cut hopes, it could support the preferreds. If Treasury yields are moving higher, it may pressure the fixed-income appeal of these securities. The preferred dividend capture is a tactical play, but its environment is shaped by these wider market forces.