NEW YORK (
) -- A fresh analysis of publicly-traded U.S. bank and thrift holding companies by
highlights another 10 bank stocks with attractive dividend yields.
An earlier feature on
was limited to selected names with higher trading volume.
The market has pulled back since that piece was published on May 19, and it seems those names are even more attractive now. Shares of the highly efficient and conservative
Hudson City Bancorp
closed at $12.68 Thursday, with shares yielding 4.73%.
Peoples United Financial
saw its yield increase to 4.47%, as shares pulled back to close at $13.87 Thursday, and
First Niagara Financial
also pulled back, to $12.84, with shares now yielding 4.37%.
To come up with this new list of ten more solid bank and thrift stocks with attractive dividend yields, we again started with first-quarter regulatory data and market data from Thursday's close provided by
, paring down the list using the following criteria:
Bank and thrift holding companies publicly-traded in the U.S., excluding the PinkSheets.
Dividend yield greater than 4% as of Friday's close.
Price-to-tangible-book ratio below 2.
Texas ratio below 20%.
The Texas ratio is a bank's nonperforming loans -- including those in nonaccrual status and loans past due 90 days or more -- divided by core capital and loan loss reserves.
Excluding names trading above two times tangible book value helps narrow down the list to stocks that may still be undervalued in the wake of the banking crisis, but the approach leaves out some stellar names, including
New York Community Bancorp
( NYB). This company's shares returned 11% year-to-date through Thursday and were yielding a fat 6.39% on a 25 cent quarterly payout. New York Community was recently featured in
We took a further conservative step this time, excluding companies that paid out more in dividends than they earned over the year ended March 31.
Excluding the six bank and thrift stocks featured previously, the table above lists the ten bank and thrift holding companies with the highest trading volume meeting the revised criteria, sorted by dividend yield.
Although the Texas ratios for some of the group approached our 20% limit, first-quarter loan losses were light for the entire group. Even
of South Burlington, Vt., which had a first-quarter net charge-off ratio of 0.83%, came in far behind the national aggregate charge-off ratio of 3.43%, as reported by the Federal Deposit Insurance Corporation.
Trustco Bank Corp
of Glenville, N.Y. has the highest trading volume on the new list. Shares closed at $6.05 Thursday and were yielding 4.13% on a quarterly dividend payout of 6.3 cents a share.
Trustco's shares were down 2% year-to-date through Thursday's close, assuming reinvestment of the dividend. Earnings have dragged a bit over the past two years as nonperforming assets increased. Still, the company has remained profitable through the credit crisis and loan losses have been light. Shares are historically cheap, trading for 1.9 times tangible book value at Thursday's close. To put that in perspective, Trustco's shares traded above three times book value at the end of 2006, 2007 and 2008.
Looking at price relative to earnings potential, shares were trading for 13.1 times the consensus 2010 earnings projection of 47 cents a share among analysts polled by
. The ratio of price to projected earnings for 2011 was 11.6. At the end of 2006, 2007 and 2007, the shares went for more than 20 times earnings.
So Trustco appears cheaply priced, although some analysts, including Mike Shafir of Sterne Agee take a neutral stance, saying the shares are fairly valued against the company's peers.
The highest-yielding stock on the list as of Thursday's market close was
CNB Financial Corp
of South Burlington, Vt.
The company's price-to-tangible-book ratio of 1.6 on the table above is based on March 31 financials, and doesn't reflect a $34.5 million common stock offering completed June 14.
Shares closed at $11.25 Thursday, down 28% year-to-date, which isn't surprising when considering dilution from common offering, against the company's market value of $137 million. While 2010's been very rough for long-term holders of the company's shares, we are looking at an excellent entry point right now, considering price-to-earnings multiples. Shares were trading at 11.4 times the consensus 2010 earnings estimate Thursday and looked exceedingly cheap for long-term investors, selling for 9.7 times the 2011 estimate and 8.6 times the 2012 estimate.
The cheapest stock on the list relative to book value was
( GIW) of Oneonta, N.Y., which was also the lowest-yielding, at 4.03%. Shares closed at $5.95 Thursday, down 16% year-to-date and trading for 0.9 times tangible book value. The quarterly dividend payout was lowered from 38 cents to 24 cents a share in April.
That dividend cut brought the company's payout ratio to just 32% according to
, which was the lowest payout ratio for any of the listed bank stocks and indicates that Wilber's dividend is now very comfortably supported by earnings.
This has obviously been a rough year for Wilber's shareholders, however, for investors considering the shares, this could be a good entry point. The company's earnings performance through the crisis hasn't been stellar, but it has remained profitable and loan losses have been relatively light. Shares were trading at 12 times projected 2010 earnings, and moving out to the 2012 consensus projection, the price-to-earnings ratio drops to 10.3.
One of the main reasons for the company's mediocre earnings over the past two years was its need to beef up loan loss reserves. Over coming quarters, economic improvement may well allow the company to go in the other direction and release reserves, boosting quarterly earnings performance and quite possibly causing analysts to increase their earnings projections.
A profitable franchise trading below liquidation value represents good value for potential investors and even makes Wilber a good takeout target for another bank.
Written by Philip van Doorn in Jupiter, Fla.
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.