NEW YORK (TheStreet) -- Recent history has proved that money center lenders such as Bank of America (BAC) , Citigroup (C) and PNC Financial (PNC) can no longer be counted on as reliable income stocks.
During the Great Recession, all drastically slashed the dividend payment to shareholders. JPMorgan (JPM) , U.S. Bancorp (USB) and Wells Fargo (WFC) all reduced dividends, too, but by lesser amounts. Smaller regional lenders with bigger dividends, bigger profit margins and smaller amounts of debt such as Northwest Bancshares (NWBI) , Oritani Financial (ORIT) and Univest Corporation of Pennsylvania (UVSP) offer attractive alternatives for income investors looking in the financial sector.
To ensure that there is enough cash so that a dividend will be paid, investors should look for publicly traded companies that make a lot of money and owe very little.
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A high profit margin and a low debt-to-equity ratio contribute a great deal to maintaining the dividend amount paid to shareholders or increasing it. That is not Bank of America, with a profit margin of 13.10% and a debt-to-equity ratio of 2.23. Nor is it Citigroup, with a profit margin of 14.50% and a debt-to-equity ratio of 1.12.
But it is Univest, Oritani Financial and Northwest Bancshares.