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5 Bank Stocks With High Dividends You Can Trust (Update 1)

4. Dime Community Bancshares
Dime Community Bancshares (DCOM) of Brooklyn, N.Y., has seen its stock return 20% through Tuesday's close at $14.66, following a 10% decline during 2011. Based on a quarterly payout of 14 cents, the shares have a dividend yield of 3.82%.

The shares trade for 1.6 times tangible book value, and for 12 times the consensus 2013 EPS estimate of $1.16. The consensus 2012 EPS estimate is $1.24.

Dime's operating return on average assets (ROA) for the 12-month period ended June 30 was of 1,14% and its return on average tangible common equity (ROE) was 14.26%, according to Thomson Reuters Bank Insight.

For the 12-month period ended June 30, the company's dividend payout ratio was 41.55%, which was the lowest among the five stocks among in our selected list.

The consensus among analysts is for Dime to report third-quarter earnings of 30 cents a share, declining from 34 cents a share in the second quarter, and 33 cents during the third quarter of 2011.

Sterne Agee analyst Matthew Kelley has a neutral rating on Dime Community Bancshares, and said on July 30 after the company announced its second-quarter results that based on a price of $14.75, the shares were "fairly valued at 13.6x our revised 2013 estimate" of $1.12, "with core earnings power under pressure as the net interest margin contracts."

Dime's net interest margin increased to 3.63% during the second quarter from 3.47% the previous quarter, "due to a decline of 45 basis points in the average cost of funding, that was partially offset by a decline of 28 basis points in the average yield on interest earning assets," according to the company. During the second quarter of 2011, the net interest margin was 3.66%.

Kelley said that "We believe asset yield compression will continue to outpace funding cost reductions over the next several quarters," but that "despite a difficult operating environment, we believe the company will be able to maintain a return on assets (ROA) above 0.90% through 2014 with solid expense management."

While the shares may indeed be fairly valued at their current level, a 3.82% dividend -- easily covered by earnings -- is nothing to sneeze at in the current environment. It's also important to carefully consider your investment horizon, because sell-side analysts' ratings typically have a short horizon of only 12 months. For an income play, "long-term" should mean much longer than a year.

DCOM Chart DCOM data by YCharts

Interested in more on Dime Community Bancshares? See TheStreet Ratings' report card for this stock.

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