NEW YORK (TheStreet) -- While bank stocks have seen flat performance so far this year, TheStreet's periodic analysis of the highest dividend payers in the sector shows that most of the highest yielding, actively traded names are down. In addition, the highest yielding name is under extra pressure, expecting a serious regulatory order to be handed down soon.
Looking at the 10 highest-yielding bank stocks with average daily trading volume of at least 50 thousand shares - using data supplied by SNL Financial - the bank stock with the highest dividend yield is Hudson City Bancorp (HCBK), at 6.07% based on Friday's closing price of $9.88 and a quarterly payout of 15 cents a share.
The shares declined 14% during the first four days of March, after the company filed its annual 10-K report with the Securities and Exchange Commission, disclosing that it expected its main subsidiary Hudson City Savings Bank to "become subject to an informal regulatory enforcement action in the form of a memorandum of understanding," or MOU, with the Office of Thrift Supervision.
The MOU is expected to require Hudson City to reduce its interest rate risk and reliance on wholesale borrowings, possibly resulting in "a decrease in the size of the balance sheet and a material charge to earnings."Despite the drag on the shares with the coming order, Hudson City's earnings have comfortably supported the dividend through the credit crisis. The problem is that in a low rate environment -- with low demand for mortgage loans -- the company's net interest margin (the difference between its annualized average yield on loans and investments and its average cost of deposits and borrowings) narrowed to 1.70% in the fourth quarter from an already-low 2.27% a year earlier. According to the Federal Deposit Insurance Corp., the aggregate net interest margin for all U.S. banks and thrifts during the fourth quarter was 3.71% and 60% of institutions reported improved net interest margins from a year earlier. As of December 31, Hudson City's deposits made up only 45% of the company's total liabilities. Additional information regarding Hudson City, including analyst reaction to the MOU disclosure, is discussed later in this story. Meanwhile, here's our take on the 10 actively traded bank stocks with the highest dividend yields. While analysts have a strong neutral bias for half the group, it is important for income seeking investors to note that all but two of these companies fully supported their dividends with earnings during 2010, and none owe government bailout funds.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV