9 Bank Dividend Stocks Bringing Sanity to Market Madness

NEW YORK ( TheStreet) -- Keefe, Bruyette and Woods says that regional banks with "compelling dividend yields" make for excellent "defensive ideas for a volatile market," in a report issued Friday.

The regional bank names listed by KBW include "franchises that can justify higher valuations given the returns they generate above their cost of equity," that also offer attractive dividends and "are in control of capital management decisions, as they are not subject to restrictions that come with certain forms of capital," such as federal bailout funds received through the Troubled Assets Relief Program, or TARP.

The following nine regional banks are rated "Outperform," or buy, out of the 16 banks discussed in the KBW report.

Bryn Mawr Bank ( BMTC) of Bryn Mawr, Pa., closed at $18.16 Thursday, declining 5% from a week earlier, but up 6.5% year-to-date. Based on a quarterly payout of 15 cents, the shares have a dividend yield of 3.30%. The shares trade for 9.5 times the consensus 2012 earnings estimate of $1.86, among analysts polled by FactSet.

KBW analyst Christopher McGratty says Bryn Mawr Bank's "core fundamental trends remain solid as the company has posted mid-teen tangible returns on average equity over the past three quarters," adding that "the company is likely to actively manage its capital position, presumably through organic growth and strategic acquisitions of banks or in the wealth management space."

CVB Financial ( CVBF) of Ontario, Calif., closed at $8.26 Thursday, pulling back 9% from a week earlier, and down 2% year-to-date. Based on a quarterly payout of 9 cents, the shares have a dividend yield of 4.12%. The shares trade for 10 times the consensus 2012 earnings estimate of 78 cents a share.

KBW analyst Julianna Balicka points out that CVB Financial "has been profitable for over 136 consecutive quarters and has had 87 consecutive quarters of dividends," and has survived "a number of real estate-related downturns" in its market area of California's Inland Empire Region, since 1974. The analyst also touts the company's excess capital and the remaining 9.4 million shares authorized for repurchase. CVB's strong capital position has the company "well positioned as an acquirer, offering an attractive stock currency and an attractive franchise for a smaller bank to join," according to Balicka.

F.N.B. Corporation ( FNB) of Hermitage, Pa., closed at $9.06 Thursday, declining 5% over the previous week, and down 6% year-to-date. Based on a quarterly payout of 12 cents, the shares have a very attractive dividend yield of 5.30%. The shares trade for 10 times the consensus 2012 earnings estimate of 84 cents a share.

KBW analyst Damon DelMonte describes F.N.B. "as having one of the best opportunities for organic growth within its current footprint," with its recent deal to acquire Parkvale Financial and the "the ongoing hotbed of activity surrounding the Marcellus Shale gas field." The Parkvale deal is valued at $130 million, and will bring on $1.8 billion in assets and 47 additional branches in the Pittsburgh area.

DelMonte says that "this an excellent time to own the shares of FNB," since the dividend is now "north of 5%," and the company "operates in one of a few areas in the country which is slated to experience heightened new loan activity."

DelMonte also has an "Outperform" rating for First Niagara Financial Group ( FNFG) of Buffalo, N.Y., which is continuing its aggressive regional expansion with its deal to acquire HSBC's ( HBC) retail branch network in Upstate New York and Connecticut. The shares closed at $10.63 Thursday, pulling back 6% from a week earlier, but down 21% year-to-date.

Based on a quarterly payout of 16 cents, First Niagara's shares have a dividend yield of 6.02%. The shares trade for just over eight times the consensus 2012 EPS estimate of $1.23.

DelMonte says that despite "investor apathy" over the HSBC deal, -- which will end up with First Niagara closing or selling about 100 of the acquired branches to alleviate the U.S. Justice Department's anti-trust concerns -- the end result of the company's expansion will be "not only a bigger bank, but one with a sound balance sheet with stronger earnings momentum." The analyst also says that First Niagara's "credit remains steady like a rock," and that "the bank's dividend policy should be viewed as a safe-haven for investors during a time of market volatility."

Hancock Holding Company ( HBHC) of Gulfport, Miss., was recently featured among TheStreet's 10 Big Banks With Solid Revenue, with strong second-quarter revenue growth, from a year earlier.

The shares closed at $29.47 Thursday, declining 5% over the previous week, and down 14% year-to-date. Based on a quarterly payout of 24 cents, the shares have a dividend yield of 3.26%. The shares trade for 10.5 times the consensus 2012 EPS estimate of $2.65.

KBW analyst Jefferson Harralson points out that amid market worries over declining net interest margins - the difference between banks' average yield on loans and investments and their average cost for deposits and wholesale borrowings - Hancock Holding Company's margin "is about to expand," from an already-strong 4.15% in the second quarter to "to 4.40% or higher in 3Q as 0.18% in additional spread from accretable yield and 0.05% of benefit from the investment of excess liquidity drive the increase."

New York Community Bank ( NYB) of Westbury closed at $12.80 Thursday, up 1% from a week earlier, but down 29% year-to-date, mainly on investor concerns over the company's high dividend payout ratio. The company earned 27 cents a share during the second quarter, while paying a 25-cent dividend. The stock's dividend yield is 7.81%.

Of course, we've seen similar pullbacks for New York Community Before, only to see the company maintain the dividend through thick and thin, as it continues to enjoy solid credit quality in its main lending market, focusing on loans collateralized by apartment houses that feature below-market rents in the New York City area.

The shares trade for just under 10 times the consensus 2012 EPS estimate of $1.21.

KBW analyst Matthew Clark says the company's dividend "should be safe," as the company is regulated by the Fed, FDIC and NY State and is not having to deal with the transition to a new regulator," like federally chartered thrifts, which are transitioning to the Office of the Comptroller of the Currency. The analyst adds 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," and that the company "has plenty of capital and liquidity not to mention a solid credit performance cycle to date."

Damon DelMonte also has an "Outperform" rating for People's United Financial ( PBCT) of Bridgeport, Conn., which closed at $11.26 Thursday, down 6% from a week earlier and down 17% year-to-date. Based on a quarterly payout of 16 cents, the shares have a dividend yield of 5.60%. The shares trade for just over 12 times the consensus 2012 earnings estimate of 89 cents a share.

DelMonte says that he believes "People's United's dividend remains safe despite its most recent quarter's operating earnings payout ratio of roughly 95%," because of its strong tangible common equity ratio of 13.9%, along with "earnings accretion from recent acquisitions, favorable asset quality metrics and normalized earnings potential as high as $1.40 per share."

Renasant Corp. ( RNST) of Tupelo, Miss., closed at $13.73 Thursday, down 6% from a week earlier and down 17% year-to-date. Based on a quarterly payout of 17 cents, the shares have a dividend yield of 4.95%. The shares trade for 10.4 times the consensus 2012 EPS estimate of $1.23.

KBW analyst Catherine Mealor says that Renasant's dividend "offers an attractive return for shareholders in a defensive name at an attractive valuation," since the shares trade for only 1.2 times tangible book value. Mealor adds that KBW is "excited about various fee income growth opportunities, particularly from the acquisition of RBC Bank's trust department and various hires in its mortgage division.

Westamerica Bancorp ( WABC) of San Rafael, Calif., closed at $41 Thursday, down 8% over the previous week, and down 21% year-to-date. Based on a quarterly payout of 36 cents, the shares have a dividend yield of 3.51$. The shares trade for 11.6 times the consensus 2012 EPS estimate of $3.35.

Julianna Balicka rates the shares "Outperform," saying that "few banks have replicated WABC's formula of delivering high returns without stretching on risk or chasing yield." While saying that an investment in Westamerica "is not for everyone," in light of "its already premium valuation," Balicka says the shares are appropriate for "investors seeking a quality bank name with sustainable returns, attractive profitability, and good dividend yield."

The analyst adds that Westamerica "has consistently demonstrated solid, predictable results with tangible ROE of above 20% for 44 out of 46 quarters since" the first quarter of 2000.

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

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

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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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