There are many people who will never own a stock that has previously cut its dividend (especially if the dividend cut occurred during a period in which they owned the stock). I find that to be an unfortunate piece of investment baggage, but I also recognize the right of everyone to invest according to the light of their own lamps. But if you are interested in weeding out suboptimal behavior, you should come to recognize that dividend cuts can often be fertile soil for deep value investment opportunities and can serve as a great launching point for high future income growth if the reason for the dividend cut was a solvable problem.
This is the situation that occurs when study Bank of America. During the financial crisis and its aftermath, Bank of America saw its share count double, the dividend got slashed, and the litigation burden became so substantial that … Read the rest of this article!