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

1. FirstMerit Corp.
Shares of FirstMerit Corp. (FMER) of Akron, Ohio, closed at $14.83 Tuesday, returning 1% year-to-date, following a 20% decline during 2011. Based on a quarterly payout of 16 cents, the shares have a dividend yield of 4.32%.

The shares trade for 1.5 times tangible book value, and for 12 times the consensus 2013 EPS estimate of $1.27. The consensus 2012 EPS estimate is $1.21.

For the 12-month period ended June 30, FirstMerit's ROA was 0.85%, and its ROE was 11.14%. During that period, the company's dividend payout ratio was 56.76%.

The company last month announced a deal to acquire Citizens Republic Bancorp (CRBC) of Flint, Mich., for roughly $912 million in cash and stock. Citizens Republic had $9.6 billion in assets as of June 30. First Merit said the acquisition would double its branch network and create "a unique, contiguous Midwest banking franchise, expanding FirstMerit's footprint into Michigan and Wisconsin, as well as strengthening its presence in Northeast Ohio."

The deal is expected to close during the second quarter of 2013, and First Merit plans to repay Citizens Republic Bancorp's "approximately $345 million of TARP preferred stock, which includes $45 million of estimated deferred dividends, held by the U.S. Treasury at closing," for bailout assistance received from the government.

The consensus among analysts is for the company to report third-quarter earnings of 32 cents a share, increasing from 28 cents in the second quarter, and 29 cents during the third quarter of 2011.

Oppenheimer analyst Terry McEvoy rates First Merit "Perform," saying on Tuesday that "After having a few weeks to digest and appraise the FirstMerit/Citizens Republic deal, we now believe that the underlying assumptions behind the transaction are conservative, which in turn could drive 2014 earnings above consensus." The consensus 2014 EPS estimate is $1.47.

The analyst said that "ideally, we think owning the stock shortly after the deal closes (2Q13) provides the most potential for upside, but would not discourage more patient investors looking at the stock today given the current dividend yield," adding that "investor sentiment on FirstMerit should improve following the merger just like it did in 2010 after the Midwest Bank deal."

FMER data by YCharts

Interested in more on FirstMerit? See TheStreet Ratings' report card for this stock.

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-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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