New York Community Bancorp: Financial Winner

NEW YORK ( TheStreet) -- New York Community Bancorp ( NYB) was the winner among the largest U.S. financial names on Tuesday, with shares rising 1.5% to close at $12.98.

The broad indexes saw a second day of slight declines, as investors digested several positive economic reports, and the Federal Reserve Open Market Committee began a two-day meeting, with investors looking for some sign of further economic stimulus.

The U.S. Commerce Department on reported that personal income rose 0.5% in June after increasing by an upwardly revised 0.3% the previous month. Personal spending was unchanged during June, after a downwardly revised 0.1% decline in May. Economists polled by Thomson Reuters had predicted that personal income would rise by 0.4% in June and that personal spending would increase by 0.1%.

The Bureau of Labor Statistics reported that compensation costs for civilian workers increased by a seasonally adjusted 0.5% for the three-month period ended June 2012, matching economists' expectations.

The KBW Bank Index ( I:BKX) declined slightly to close at 45.52, with 20 of the 24 index components showing declines for the session.

New York Community Bancorp's shares have now returned 9% year-to-date, following a 30% decline during 2011.

New York Community's shares trade for 1.8 times their reported June 30 tangible book value of $7.14, and for 12.5 times the consensus 2013 earnings estimate of $1.04, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is $1.11.

Based on a quarterly payout of 25 cents, the shares have a dividend yield of 7.70%.

With one of the most generous payouts on common shares in the banking industry, some analysts have been questioning the company's ability to maintain its dividend for years, but New York Community Bancorp has managed to maintain the 25-cent quarterly dividend for 34 consecutive quarters.

The company last Wednesday reported second-quarter earnings of $131.2 million, or 30 cents a share, increasing from $118.3 million, or 27 cents a share, during the first quarter, and $119.5 million, or 27 cents a share, during the second quarter of 2011. The sequential earnings improvement mainly reflected an increase in mortgage banking income to $58.3 million during the second quarter, from $35.2 million the previous quarter.

The company's second-quarter return on average assets was 1.36% and its return on average tangible equity was 17.40%, which are both solid returns in the current environment for banks.

KBW analyst Fred Cannon rates New York Community Bancorp a "Outperform," although he lowered his price target for the shares by two dollars to $13 last Thursday, while raising his 2012 earnings estimate to $1.14 from $1.03, and leaving his 2013 EPS estimate unchanged at $1.08.

Canon said that multifamily mortgage loan "prepayment income and mortgage banking should allow NYB to cover the dividend for the next two quarters at a minimum," and that "barring any M&A transaction that the company may enter then we believe the dividend is safe."

On the other hand, the analyst said that "there is near-term deal risk in shares of NYB and a higher discount rate and the lower price target is appropriate," adding that "while we do not believe a deal is imminent, we also believe that NYB could use its shares as currency for the right opportunity given the stock currently trades at 1.8x tangible book value which is above the 1.2x median multiple of peers."

Interested in more on New York Community Bancorp? See TheStreet Ratings' report card for this stock.

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

>Contact by Email.

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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