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TheStreet Open House

10 Profitable Banks With Dividend Yields Up to 7.7% (Update 1)

5. Valley National Bancorp

Shares of Valley National Bancorp (VLY) of Wayne, N.J, closed at $12.36 Friday, for a flat year-to-date return, following a 4% decline during 2011.

Based on a quarterly payout of 17 cents, the shares have a dividend yield of 5.50%.

The shares trade for 2.3 times tangible book value and 16 the consensus 2012 EPS estimate of 79 cents. The consensus 2013 EPS estimate is 84 cents.

The company had $14.2 billion in total assets as of Dec. 30, and its quarterly ROA ranged from 0.70% to 1.04 during 2011, according to HighlineFI.

Valley completed a major expansion on Jan. 1, with its acquisition of State Bancorp -- the holding company for State Bank of Long Island -- which had $1.6 billion in total assets, with 16 branches in Nassau and Suffolk counties, as well as in New York City. Valley paid roughly $208 million for State Bancorp, in an exchange of shares.

Morgan Keegan analyst Ebrahim Poonawala rates Valley "Market Perform," with $13 price target, saying on Jan. 27 that the company is "focused on growing the bank, despite a tough operating environment with VLY reporting improving loan growth momentum for the quarter with period end loans up 1.9% sequentially," and is "remaining on the sidelines where its sees inadequate returns or irrational competition (has been relatively inactive in indirect auto lending in 2011 due to intense pricing competition)."

Poonawala also said that Valley's objective of achieving cost savings of roughly 25% of State Bancorp's $40 million in annual expenses is "a manageable goal."

Regarding the stability of the dividend, the analyst said that "although the current dividend represented an 87% payout ratio of FY11 EPS, above the bank's historical levels of around 55-60%, we consider the common dividend to be manageable given the favorable outlook on credit and relatively stable" earnings before loan loss reserve provisions and taxes.

Interested in more on Valley National Bancorp? See TheStreet Ratings' report card for this stock.

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