NEW YORK ( TheStreet) -- Several profitable banks with attractive dividend yields saw their shares pull back significantly during the first half of 2011, and in a prolonged low-rate environment, are worth a second look by income-seeking investors and for growth investors who can commit for the long haul.
Some bank stocks with attractive dividend yields showed weakness because investors were concerned about increasing dividend payout ratios.
One very well-known name for investors hungry for dividends was Hudson City Bancorp (HCBK) of Paramus, N.J., which reported a first-quarter net loss of $555.6 million and reduced its quarterly dividend to 8 cents a share from 15 cents a share, after the Office of Thrift Supervision forced the company to restructure its balance sheet after the company's long-term leverage strategy of borrowing from the Federal Home Loan Bank of New York and investing the proceeds in securities backfired.
Hudson City closed at $8.19 Thursday, with the shares dropping 34% during the first half of 2011. Based on that price, the shares have a dividend yield of 3.91%.To come up with our list, we began with publicly traded U.S. bank stocks with dividend yields exceeding 4%, with three-month average daily trading volume of more than 50,000 shares, and then isolated the five names that pulled back the most during the first half of 2011. We left out one name that has no analyst coverage. All data was provided by SNL Financial. All five of these bank holding company stocks are trading above 11 times the 2012 consensus earnings estimates among analysts polled by FactSet. The relatively high dividend yields support much higher multiples than investors are seeing for the largest banks. Looking at the "big four" U.S. banks, with continued exposure from mortgage putback claims, increasing regulatory capital requirements and various threats to revenue, the price multiples are strikingly low, and likely to remain that way until the group settles the bulk of investors' mortgage claims and U.S. regulators finally settle on enhanced capital requirements. For Bank of America (BAC), the price-to-forward earnings ratio was 6.6, based on Thursday's closing price of $10.96 and a consensus 2012 earnings estimate of $1.68 a share. Shares of JPMorgan Chase (JPM) closed at $40.94 Thursday, for a forward P/E of 7.2, based on the consensus 2012 earnings estimate of $5.61 a share. Shares of Citigroup (C) closed-out the second quarter at $41.64, or eight times the consensus 2012 earnings estimate of $5.20 a share. The most expensive relative to forward earnings among the "big four" was Wells Fargo (WFC), at 8.2 times the consensus 2012 earnings estimate of $3.42, when the shares closed Thursday at $36.02. Here are the five actively traded bank dividend stocks seeing significant pullbacks during the first half of the year, sorted by ascending dividend yield.
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