NEW YORK (
) -- An analysis of publicly-traded U.S. bank holding companies by
highlights six bank stocks with attractive dividend yields and strong prospects for growth.
A stable dividend exceeding 4% is quite compelling considering how low interest rates are.
Based on first quarter regulatory data and market data from Friday's close provided by SNL Financial, we narrowed down the list using the following criteria:
Bank and thrift holding companies publicly-traded in the U.S., excluding the PinkSheets.
Dividend yield greater than 4% as of Friday's close.
Price-to-tangible-book ratio below 2.
Three-month average trading volume over 25,000 shares.
Texas ratio below 20%.
The Texas ratio is a bank's ratio of nonperforming loans and securities to core capital and loan loss reserves, and was among the key ratios investors and regulators focused on as the real estate bubble burst. A Texas ratio of 40% is typically considered a threatening level, depending of course on a bank's overall level of capital and reserves. Keeping our picks below a 20% Texas ratio is pretty conservative.
U.S. Solvency Depends on Interest Rates (Forbes)
Limiting the group to bank stocks selling for less than two times tangible book value is also conservative, limiting downside risk over the short term. As the graphics following will show, most of these bank and thrift holding company stocks sold at higher levels relative to book value at the end of 2007 and 2006, before the crisis hit.
This approach also excludes some compelling bank plays with high dividends, such as
New York Community Bank
, with shares yielding 6.25% but selling for 2.4 times tangible book, after rising 14% year-to-date.
Here are the bank dividend picks, with further discussion on where the stocks are trading, relative to projected earnings.