NEW YORK ( TheStreet) -- In light of the brutal pummeling for bank stocks on Monday, in the wake of in the wake of S&P's downgrade of its long-term debt rating for the United States, along with additional downgrades of government-sponsored enterprises and insurers, Oppenheimer analyst Terry McEvoy sees safety in dividends.

Saying that "higher dividend stocks may outperform" if the high level of market volatility continues, the analyst recommended FirstMerit ( FMER), Iberiabank ( IBKC) and Huntington Bancshares ( HBAN), in a report published Tuesday.

All three names are rated "Outperform" by Oppenheimer and feature "attractive dividend yields, strong capital positions and healthy credit profiles, according to McEvoy.

FirstMerit closed at $12.51 Tuesday, declining 8% for the day and 14% from a week earlier. Based on a quarterly payout of 16 cents, the shares have a dividend yield of 5.12%. McEvoy's price target for the shares is $19.00.

Iberiabank closed at $45.38 Monday, sliding 8% for the day and 11% from a week earlier. Based on a quarterly payout of 34 cents, the shares have a dividend yield of 3.00%. McEvoy's price target is $70.00.

Huntington Bancshares closed at $5.09 Monday, down 8.5% for the day and 18% from a week earlier. Based on a four-cent quarterly payout, the shares have a dividend yield of 3.25%. Huntington increased the dividend from a penny, when the company announced its second-quarter earnings. McEvoy's price target for the shares is $7.50.

The analyst said that "with capital levels growing and limited opportunities to deploy capital via loan growth or acquisitions," more banks are deciding to increase their return of capital to investors.

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

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.
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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