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TheStreet Open House

10 Bank Dividend Stocks

NEW YORK ( TheStreet) -- The dog days of summer have increased the dividend yields on many quality bank and thrift names, underscoring how cheap these stocks are right now and presenting fantastic long-term growth and income plays for investors.

Since TheStreet published 10 More Bank Stocks With Solid Dividends in late June, yields on several quality bank and thrift stocks with significant dividend payouts have increased considerably.

For example, shares of First Niagara Financial (FNFG) closed at $12.08 and based on a quarterly payout of 14 cents a share had a dividend yield of 4.64%, up from 4.37% on June 24. First Niagara announced last week that was in talks to aquire New Alliance Bancshares (NAL) for $1.5 billion.

With so many healthy bank and thrift holding company stocks continue to pull back over the summer, this is a good time to once again highlight quality growth and income names using conservative criteria. Starting with regulatory data and market data from Friday's close provided by SNL Financial, we pared down the list of 1,001 publicly traded bank and thrift holding companies - excluding those traded on the PinkSheets - using the following criteria:

  • Dividend yield greater than 4% as of Friday's close.

  • Price-to-tangible-book ratio below 2.

  • Nonperforming assets (NPA) below 3% of total assets.
  • We excluded companies for which tangible book value was unavailable from SNL. Regulatory data was for the most recent quarter available, since second-quarter data wasn't yet available for all the bank and thrift holding companies.

    SNL defines nonperforming assets (NPA) as nonaccrual loans (less government-guaranteed balances), restructured loans and foreclosed assets. If this wasn't available from Securities and Exchange Commission filings, we used the most recent data for holding companies required to file with the Federal Reserve. For holding companies for which SNL couldn't provide the ratio from either of those sources, we used the combined NPA ratio was their combined bank and thrift subsidiaries.

    Once again we were extra-conservative, excluding names paying out more in dividends than they earned during the first half of 2010 (which excluded First Niagara), and names trading for more than two times tangible book value. We also excluded companies still owing money to the government for bailout funds received through the Troubled Assets Relief Program, or TARP.

    Excluding names trading above two times tangible book value helps use to focus on high-yielding names that may also be undervalued, but this approach has us once again leaving out New York Community Bancorp (NYB), which has benefitted from acquisitions of failed institutions during the crisis, and had a dividend yield of 6.23% as of Friday's close.

    Finally, since our last story of this type featured low-volume names, this time we listed the ten bank stocks meeting the above criteria that had the highest three-month average trading volume according to SunGard data provided by SNL.

    Please click the image below to see the list, sorted by dividend yield:

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