NEW YORK ( TheStreet) -- New York Community Bancorp ( NYB) is known to pay one of the highest dividends among actively-traded bank stocks, and KBW analysts believe it is likely to make an acquisition that could give it an earnings boost.

New York Community was upgraded to an "outperform" rating from "market perform" late on Wednesday, by KBW analyst Collyn Gilbert.

Gilbert raised her price target for the shares to $15.00 from $13.00, saying in a report that "while certain bank stocks appear constrained by a lack of catalysts, an acquisition for NYCB could prove to be a positive catalyst for the shares." The analyst said the price-target increase reflected "a 60% probability that New York Community is able to execute an accretive acquisition."

New York Community Bancorp had $44.1 billion in total assets as of Dec. 31, operating branches under several local bank names, including Queens County Savings Bank.

The bank has traditionally focused on multifamily lending in the New York City area, concentrating on apartment buildings with below-market rents, leading to a long-term record for excellent asset quality. The company has a long history of acquiring local competitors and also expanded its regional footprint beyond New York and New Jersey to include Ohio, Florida and Arizona, through its last major acquisition of AmTrust Bank of Cleveland, in December 2009.

The purchase of the failed AmTrust from the Federal Deposit Insurance Corp. also greatly expanded New York Community's single-family mortgage lending business. CEO Joseph Ficalora at a conference on Monday said the company had originated over $30 billion in residential mortgage loans since the AmTrust acquisition, according to a transcript provided by Thomson Reuters.

Back to Buying

Ficalora said "we are an acquirer of banks, and we are likely to do a highly accretive deal." A large deal would take the company over the $50 billion total assets threshold, making it a "systemically important financial institution," subjecting the company to greater regulatory scrutiny and annual Federal Reserve stress tests through the Capital Plan Review (CapPR).

Ficalora said that New York Community was "actively working toward getting regulatory approval so as to be a SIFI bank -- a bigger bank." He added that "It is our intent to do whatever the necessary work is to get that approval because, in the environment ahead, there will be opportunities to create great value for shareholders by doing, at least in our case, first a large deal and then whatever other deals we need to do."

According to Gilbert, New York Community has already made the required systems upgrades that would be needed to comply with annual Federal Reserve stress tests as a SIFI. "The efficiency gains of a larger acquisition could help manage the increased regulatory costs," she said.

"NYCB's lending engine has always outstripped its deposit generation," Gilbert said, adding that the acquisition of deposit sources outside the New York City area should be "a very efficient way" to boost liquidity.

Possible targets for New York Community include Popular, Inc. ( BPOP - Get Report), of Hato Rey, Puerto Rico, First Citizens Bancshares ( FCNCA - Get Report) of Raleigh, N.C., First Horizon National ( FHN - Get Report) of Memphis, Tenn., and OneWest Bank of Pasadena, Calif., according to Gilbert. The analyst said that "we have no knowledge of any M&A discussions or negotiations between New York Community and any of these named targets."

OneWest Bank is the former IndyMac Bank, which failed in July 2008, and was then run under FDIC Conservatorship, until being sold to private equity investors in March 2009. "We tend to think OneWest could be the most suitable," Gilbert wrote, because of OneWest's private equity ownership, a similar business model to AmTrust, and "limited competition among other potential buyers."

The Dividend

New York Community Bancorp's shares closed at $13.31 Wednesday. The company pays a quarterly dividend of $0.25 a share, for a yield of 7.51%. That is by far the highest dividend yield among actively traded bank stocks, with average daily trading volume of at least 20,000 shares, according to data supplied by Thomson Reuters Bank Insight.

Please see TheStreet's 10 Buy-Rated Bank Stocks With Highest Dividend Yields for details on other bank stocks with high dividend yields.

The company reported 2012 net income of $501.1 million, or $1.13 a share, increasing from $480.0 million, or $1.09 a share in 2011, so the dividend payout ratio is rather high. Then again, New York Community has managed to maintain the dividend for 36 consecutive quarters, showing that its business was quite stable through the credit crisis, and providing plenty of income for its shareholders.

Some analysts have questioned the company's ability to maintain the dividend, especially if it grows to become a SIFI. Ficalora said during the company's earnings conference call on Jan. 30 that "the idea that we would be governed by what other people can afford to pay is not consistent with anything that has historically happened in the marketplace. We, in fact, have demonstrated very clearly that, during a period of great risk and great loss, that we lose very, very little capital." The CEO stressed that New York Community Bancorp covered any loan losses through the credit crisis "with earnings," and that "our ability to pay out current earnings is significantly better than that of other banks."

When discussing the possibilities of regulators forcing the company to lower its dividend, Ficalora said "there is individual review of every bank with regard to capacity to pay. And the limitation on capacity to pay is driven by the adequacy of your capital to deal with stress. There is no indication that we aren't way overcapitalized based on the likely charges we would have to capital."

Gilbert sees a "favorable risk/reward" in her analysis of several possible deal outcomes for New York Community Bancorp, most of which would include the company maintaining the annual dividend of $1.00 a share. However, if the company is unable to complete a major acquisition, while the interest rate environment remains unchanged, with weak loan demand, she sees "potential downside of -6% assuming a stressed standalone value ($12), and a 50% dividend cut ($0.50)."

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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 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.