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Three Bank Stocks With Outsized Dividends

Capitol Federal Financial is a thrift with headquarters in Topeka, Kan. It had $8.4 billion in assets as of June 30. The company's 50-cent quarterly dividend represents a yield of 6.74%.

Capitol Federal Financial said yesterday that fiscal 2009 net income, ending on Sept. 30, rose 29% to $66.3 million, or $3.15 a share. While it's not a stellar earnings performer, with a return on assets of 0.81% for fiscal 2009, Capitol Federal's dividend appears safe. The company has maintained excellent credit quality through the financial crisis and had a strong tangible common equity ratio of 10% as of Sept. 30. Regulatory capital ratios for main subsidiary Capitol Federal Savings weren't yet available for the third quarter, but the thrift's total risk-based capital ratio was a high 23.07% as of June 30.

The net interest margin for fiscal 2009 was 2.20%, increasing from 1.75% in the previous fiscal year, with the improvement attributed to lower funding costs. Still, the industry average for the second quarter was 3.43%.

Capitol Federal is paying a special annual dividend of 29 cents a share. Factoring in the special payout, the company's earnings more than cover its dividends, with an adjusted ratio of dividends paid out to net income of 72%. A year earlier, the company paid a special dividend of 11 cents a share.

The company is mainly a single-family mortgage lender, but has followed a strategy for several years of supplementing its deposit funding through Federal Home Loan Bank advances, and maintaining a quarter of its assets in mortgage-backed securities.
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