Updated with important news about Park National Corp.
NEW YORK (
) -- Many banks have increased their dividend payouts this year, while very few have lowered them, and the weakness in share prices has pushed dividend yields even higher.
With short-term rates likely to remain near zero for some time and long-term rates heading lower in the wake of the
"Operation Twist," familiar banking names with high dividend payouts are looking more and more attractive for income-seeking investors.
According to KBW's Dividend Tracker, 30 publicly traded banks and thrifts raised their dividends during the third quarter. The only publicly traded bank lowering its dividend was
of Harrisburg, Pa., which has a deal in place to be acquired by
of Lititz, Pa. One company --
of Riverhead, N.Y. -- eliminated its dividend during the third quarter.
The weakness in stock prices for the entire banking sector has propped up dividend yields for the higher payers. Using data provided by SNL Financial, TheStreet has identified the 10 publicly traded banks and thrifts with the highest dividend payouts, excluding companies trading on the Pink Sheets and two less actively traded names with average daily trading volume of less than 50,000 shares.
Back in August, we identified a
, taking a far more conservative approach, by excluding companies paying out more than 50% of earnings.
This time we have included all the actively traded high-yielding names, most of which are headquartered in the North East. Some have high dividend payout ratios which don't tell the full story. Some have been expanding in a major way, taking advantage of the cut-rate prices and bank failures to make strategic acquisitions.
At a time of daily uncertainty for most stocks and ever-declining fixed-income yields, it pays to take a look at the bank dividend stocks. If you develop confidence that one or more of these names will easily support the dividend and maybe even increase it as earnings increase, you could be looking at a bargain right now, setting yourself up for major gains down the road when bank valuations return to more normal levels, enjoying a steady dividend return while you wait.
, in order of ascending dividend yield:
10. People's United Financial
People's United Financial
of Bridgeport, Conn., closed at $11.88 Thursday, down 12% year-to-date. Based on a quarterly payout of 16 cents, the shares have a dividend yield of 5.30%.
According to an SNL Financial report CEO John Barnes said at the Barclays Capital Global Financial Services Conference in September that People's United was making progress in reducing expenses, mainly through headcount reductions. Including expense savings from its acquisition of Danvers Bancorp on June 30, Barnes expects People's United to cut its annual expenses by roughly $30 million in 2012.
The company's tangible common ratio of 13.89% as of June 30 is the strongest among this group of 10 banks and thrifts, and Barnes said People's United was considering several ways to allocate the excess capital, through organic expansion, share buybacks, dividend increases and additional acquisitions in a "well-priced end market" for acquisitions.
People's United was the main company featured in
, with second-quarter pre-provision (for loan losses) net revenue more than doubling year-over-year, to $98.4 million, according to SNL, which in part reflected the November acquisitions of LSB Corporation of North Andover, Mass., and Smithtown Bancorp of Smithtown, N.Y.
Second-quarter net income was $51.2 million, or 15 cents a share, increasing from $16 million, or four cents a share, in the second quarter of 2010. The provision for loan losses was $14 million in the second quarter, declining from $17.8 million a year earlier.
The second-quarter net interest margin -- essentially the difference between a bank's average yield on loans and investments and its average cost for deposits and borrowings -- was a strong 4.13%, increasing from 3.69% a year earlier. The second-quarter operating return on average assets (ROA) was 0.82%, according to SNL.
The shares trade for 13 times the consensus 2012 earnings estimate of 87 cents a share, among analysts polled by FactSet.
Out of 15 analysts covering People's United, six rate the shares a buy, while the remaining analysts all have neutral ratings.
9. United Bankshares
of Charleston, W.V., has seen its stock decline 22% year-to-date, closing Thursday at $21.94. Based on a quarterly payout of 30 cents, the shares have a dividend yield of 5.47%.
The company on July 8 completed its acquisition of Centra Financial Holdings of Morgantown, W.V., bringing on $1.3 billion in assets and 15 branches.
United Bankshares had $7.1 billion in total assets as of June 30. Second-quarter net income was $17.5 million, or 40 cents a share, declining slightly from $17.9 million, or 41 cents a share, a year earlier. The second-quarter net interest margin was 3.83%, increasing from 3.69% a year earlier.
The second-quarter operating ROA was 0.98%, according to SNL.
Guggenheim Securities analyst David Darst in August maintained his neutral rating on United Bankshares, while lowering his price target to $22 from $26, to bring the target down to "12x earnings power." Darst said that the shares have "historically held a premium valuation given clean asset quality and a strong franchise profile with ~50% of the franchise located in northern VA and Washington DC."
The shares trade for 12 times the consensus 2012 EPS estimate of $1.77, among analysts polled by FactSet.
Out of 10 analysts covering United Bankshares, two rate the shares a buy, while the remaining analysts all have neutral ratings.
8. Hudson City Bancorp
Hudson City Bancorp
of Paramus, N.J., closed at $5.85 Thursday, down 53% year-to-date. Based on a quarterly payout of eight cents, the shares have a dividend yield of 5.47%.
Hudson City Bancorp lost $555.6 million, or $1.13 a share, during the first quarter , after being forced by the Office of Thrift Supervision 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 in a prolonged low-rate environment.
The company also lowered its quarterly dividend to 8 cents a share, from 15 cents a share.
Hudson City returned to profitability in the second quarter, with earnings of $96 million, or 19 cents a share, declining from $142.6 million, or 29 cents a share, during the second quarter of 2010. Total assets were $51.8 million as of June 30, declining 15% from a year earlier, reflecting the first-quarter deleveraging. The deleveraging also led to an increase in Hudson City's net interest margin to 2.14%, from 1.72% in the first quarter and 2.13% in the second quarter of 2010.
Hudson City's second-quarter ROA was 0.74% according to SNL, declining from 0.93% a year earlier. This reflects the company's industry-leading efficiency. The company's second-quarter efficiency ratio -- essentially the number of pennies of expenses for each dollar of revenue -- was a tax-adjusted 30.26 according to SNL, which was by far the lowest and best among the large regional holding companies.
Matthew Kelley of Sterne Agee in September reiterated his neutral rating on the shares, saying that "without a restructuring, in a sustained low rate environment we see the balance sheet shrinking and margins compressing for an extended period." Kelly added that a second restructuring of Hudson City's long-term borrowings "combined with a capital raise could put the company in a much better position to grow and take advantage of wider spreads and a more robust private mortgage market in the future."
The shares trade for eight times the consensus 2012 earnings estimate of 73 cents a share, among analysts polled by FactSet.
Out of 15 analysts covering Hudson City, 14 have neutral ratings and one analyst recommends selling the shares.
7. TrustCo Bank Corp.
TrustCo Bank Corp.
of Glenville, N.Y., closed at $4.66 Thursday, down 24% year-to-date Based on a quarterly payout of seven cents, the shares have a dividend yield of 5.63%.
The company had $4.1 billion in total assets as of June 30, with over 130 branches mainly in Upstate New York and Florida, and also in Vermont, Massachusetts and New Jersey.
Second-quarter net income was $7.8 million, or 10 cents a share, increasing from $7.1 million, or nine cents a share, in the second quarter of 2010. A 19% year-over-year decline in noninterest income to $4.6 million -- mainly resulting from reduced service fees -- was more than offset by a 6% increase in net interest income to $33.8 million and a reduction in the provision for loan losses to $4.9 million in the second quarter, from $7.1 million a year earlier.
The second-quarter net interest margin was 3.47%, declining from 3.51% a year earlier. The second-quarter ROA was 0.77%, according to SNL.
The shares trade for 11 times the consensus 2012 EPS estimate of 42 cents, among analysts polled by FactSet.
Both analysts covering TrustCo rate the shares a buy.
6. Astoria Financial
of Lake Success, N.Y., closed at $8.67 Thursday, down 36% year-to-date. Based on a quarterly payout of 13 cents, the shares have a dividend yield of 6.00%.
The company had $17.1 billion in total assets as of June 30, operating 86 Astoria Federal Savings branches in the boroughs of Queens and Brooklyn in New York City, and the surrounding counties of Nassau, Suffolk and Westchester, in New York.
Astoria reported second-quarter net income of $16.8 million, or 18 cents a share, increasing from $15.5 million, or 17 cents a share, in the second quarter of 2010. A 14% year-over-year decline in net interest income to $95.7 million - experienced as loan balances declined, with weak mortgage loan demand -- was more than offset by a reduction in the provision for loan losses to $10 million in the second quarter, from $35 million a year earlier.
The company's second-quarter net interest margin was 2.34%, narrowing slightly from 2.37% a year earlier. The second-quarter ROA was 0.39%, according to SNL Financial.
Sterne Agee analyst Matthew Kelly has a neutral rating for Astoria and on Sept. 16 lowered his 2012 and 2013 EPS estimates to 68 cents each, from previous estimates of 70 cents for 2012 and 80 cents for 2013, saying he was "now see earning assets declining by 12% and 2% in 2012 and 2013," along with a continued decline in the net interest margin.
The shares trade for 10.5 times the consensus 2012 EPS estimate of 80 cents, among analysts polled by FactSet.
Out of 14 analysts covering Astoria Financial, three rate the shares a buy, nine have neutral ratings, and one analyst recommends selling the shares.
5. Valley National Bancorp
Valley National Bancorp
of Wayne, N.J., closed at $11.23 Thursday, down 14% year-to-date. Based on a quarterly payout of 17 cents, the shares have a dividend yield of 6.14%.
Valley had $14.5 billion in total assets as of June 30, with roughly 200 branches in northern and central New Jersey and the boroughs of Manhattan, Brooklyn and Queens, in New York. The company expects to complete its acquisition of
( STBC) of Jericho, N.Y., during the fourth quarter.
The company earned $25.2 million during the second quarter, or 22 cents a share, increasing from $14.1 million, or 20 cents a share, in the second quarter of 2010. The earnings improvement reflected $16.4 million in securities gains during the second quarter and a decline in the provision for loan loss reserves to $6 million from $12.4 million a year earlier.
The second-quarter net interest margin was a tax-adjusted 3.71% which was slight decrease from 3.72% a year earlier. The second-quarter ROA was 1.03%, according to SNL Financial.
Guggenheim Securities analyst David Darst in August reiterated his "Buy" rating for Valley, but lowered his price target to $13.50 from $15.00, to reflect the "new market environment" for the banking sector, adding that the high dividend yield "coupled with an above peer
long-term return on equity of 11%... warrants a premium valuation relative to peers."
The shares trade for 12 times the consensus 2012 EPS estimate of 90 cents, among analysts polled by FactSet.
Out of nine analysts covering Valley National, two rate the shares a buy, six have neutral ratings, and one analyst recommends investors part with the shares.
4. First Niagara Financial Group
First Niagara Financial Group
closed at $9.41 Thursday, down 30% year-to-date. Based on a quarterly payout of 16 cents, the shares have a dividend yield of 6.80%.
The company agreed in July to purchase 195 branches in Upstate New York and Connecticut from
for roughly $1 billion, in a deal that is expected to be completed in early 2012.
When the deal was announced on July 31, First Niagara CEO John Koelmel said that after an anti-trust review by the Department of Justice, the company had determined it would need to close or sell roughly 100 of the acquired HSBC branches.
First Niagara's shares have fallen 23%, since July 29, the session before the HSBC deal was announced, which is pretty much in-line with the overall performance for the sector, however, the drop in the share price magnifies the painful dilution investors will face when the HSBC deal is completed, and before the messy branch divestitures begin.
First Niagara said it expected "to raise approximately $750 million to $800 million in common stock and $350 million to $400 million in debt prior to transaction closing," and that the HSBC deal's "tangible book value payback period of four to five years, assuming initial tangible book value dilution of 17% to 18%."
Based on the July 29 stock price of $12.25 and, shareholders were facing a 22% dilution of their stake in the company, with the issuance of 61.2 million new shares if it were to raise $750 million in common equity.
Based on Thursday's closing price of $9.41, First Niagara would issue $79.7 million new shares to raise $750 million, so shareholders now face a 28% dilution to their ownership stake -- based on the 282.4 million in weighted average diluted shares outstanding for the second quarter, according to First Niagara's second-quarter 10-Q filing with the Securities and Exchange Commission -- to gain $15 billion in deposits and 195 branches from HSBC, followed by the expected sale or closure of over half the branches.
for a discussion of First Niagara's second-quarter performance.
The shares trade for 7.5 times the consensus 2012 EPS estimate of $1.20, among analysts polled by FactSet.
Out of 10 analysts covering First Niagara, seven rate the shares a buy, while the remaining analysts all have neutral ratings.
3. Park National Corp.
Park National Corp.
of Newark, Ohio, closed at $54.55 Thursday, down 21% year-to-date. Based on a quarterly payout of 94 cents, the shares have a dividend yield of 6.89%.
The company had $7.3 billion in assets as of June 30, with 124 branches in Ohio, Kentucky, Florida and Alabama
Park National is the only holding company listed here still owing federal bailout funds received through the Troubled Assets Relief Program, or TARP. The government holds $100 million in Park National preferred shares.
On August 10, Park National said in a filing that it would be late in filing its second-quarter 10-Q report with the Securities and Exchange Commission, because of a continuing disagreement with the Federal Deposit insurance Corp. and Florida regulators over a recent examination of the company's Florida subsidiary, Vision Bank. The company plans to appeal the regulators' recommendation to charge off an additional $18 million in impaired loans, which Park National says have "guarantor support."
In an SEC filing on Tuesday, Park National disclosed a "material weakness" in its annual 10-K filing for 2010, saying the company's "management utilized the work of a third-party contractor, which was not a licensed appraiser, when calculating the fair value of collateral for certain impaired loans and the fair value of certain
repossessed real estate at Vision Bank."
SNL Financial reported on Wednesday that Park National had retained Keefe Bruyette & Woods to evaluate "strategic alternatives" for the company, including a possible sale.
Vision Bank was included in
recent coverage of the
, since the bank's ratio of nonperforming assets to total assets was 17.66% as of June 30.
Moving back to the holding company, Park National reported second-quarter net income available to common shareholders of $18.9 million, or $1.22 a share, declining from $19.7 million, or $1.30 a share, in the second quarter of 2010. Gains on securities sales of $15.4 million reported during the second quarter were partially offset by an increase in the provision for loan losses to $23.9 million, from 13.3 million a year earlier.
The second-quarter net interest margin was 3.99%, declining slightly from 4.04% a year earlier. The second-quarter ROA was 1.11% according to SNL, for the second-best operating performance among this group of 10 bank and thrift holding companies.
The shares trade for 10 times the consensus 2012 EPS estimate of $5.33, among analysts polled by FactSet.
The six analysts covering Park National are evenly split between buy ratings and neutral ratings.
Yield-seeking investors may wish to steer clear of Park National, as the company is very much "in play," and disclosures of material weaknesses in SEC filings are never good.
2. First Financial Bancorp
First Financial Bancorp
of Cincinnati closed at $15.55 Thursday, declining 13% year-to-date. Based on a dividend payout of 27 cents, the shares have a dividend yield of 6.95%.
On Sept. 23, First Financial completed its acquisition of 16 Ohio branches from Liberty Savings Bank, FSB, for roughly $22 million. The purchase included "approximately $341 million of total deposits associated with the branches. Additionally, the Bank purchased approximately $124 million of in-market performing loans."
The company had $6 billion in total assets as of June 30. Second-quarter net income was $16 million, or 27 cents a share, declining from $17.8 million, or 30 cents a share, in the second quarter of 2010. The second-quarter net interest margin was a strong 4.61% during the second quarter, increasing from 4.53% a year earlier.
The second-quarter earnings decline reflected reduced net interest income, as loan balances declined, and an increase in provisions for loss on loans not covered by Federal Deposit Insurance Corp. loss sharing guarantees. Results also reflected a 17% year-over-year decline in deposit account service charges to $5.1 million, and reduced fee revenue from debit cards and trust and wealth management services.
The second-quarter operating ROA was 1.03% according to SNL.
The shares trade for 12 times the consensus 2012 EPS estimate of $1.27, among analysts polled by FactSet.
The eight analysts covering First Financial Bancorp are evenly split between buy ratings and neutral ratings.
1. New York Community Bancorp
Shares of New York Community Bancorp of Westbury closed at $12.54 Thursday, down 30% year-to-date. Based on a quarterly payout of 25 cents, the shares have a dividend yield of7.97%. That's the highest dividend yield among publicly traded U.S. bank and thrift holding companies -- excluding those traded on the Pink Sheets -- according to SNL Financial.
The shares have been pressured this year, with media coverage of the company's high dividend payout ratio, however, we've seen this action before over the past several years, and New York Community has maintained its generous dividend payout for 30 straight quarters.
CEO Joseph Ficalora recent
discussed the company's expansion philosophy
in an interview with
The company reported second-quarter net income of $119.5 million, or 27 cents a share, declining from $131.4 million, or 30 cents a share, in the second quarter of 2010, as revenue from New York Community's mortgage lending business declined. The second-quarter ROA was 1.17% according to SNL, which was the highest among this group of bank and thrift holding companies.
KBW analyst Matthew Clark said back in August that New York Community's dividend "should be safe," as the bank is regulated by the Federal Reserve, FDIC and NY State and "is not having to deal with the transition to a new regulator," like federally chartered thrifts, which have transitioned to the Office of the Comptroller of the Currency.
Clark also said that "NYB continues to cover the dividend on a cash basis, including a 1-year look-back, and we believe the latest earnings power can hold up even with the latest move in rates," adding that the company "has plenty of capital and liquidity not to mention a solid credit performance cycle to date."
The shares trade for 10.5 times the consensus 2012 EPS estimate of $1.16, among analysts polled by FactSet.
Out of 17 analysts covering New York Community Bancorp, seven rate the shares a buy, nine have neutral ratings, and one analyst recommends investors bail.
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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.