Small banks like New York Community Bank (NYCB) have some big advantages over their bulge-bracket peers.
NYCB fared relatively well during the 2008 financial crisis, since it avoided the risky activities that got the major banks in trouble.
And, NYCB’s dividend yield towers above its big bank peers. With a 5.2% dividend yield, NYCB stock pays more than double the average dividend yield in the S&P 500 Index.
NYCB is one of 295 stocks with a 5%+ dividend yield.
Last year, NYCB committed the ‘cardinal sin’ in dividend growth investing—it cut its dividend. In light of this, investors could hardly be blamed for not trusting NYCB’s current dividend yield.
However, there was a valid reason for NYCB cutting its dividend, and it was not because of deteriorating financial performance.
Going forward, the new dividend level should be sustainable. Plus, NYCB offers a very strong dividend yield, at a time when interest rates remain low. Most other big bank stocks have current dividend yields in the 2%-3% range.
This article will discuss why NYCB’s 5% yield could be attractive for high-yield dividend investors.
Business Overview
NYCB is a bank holding company. It operates two major entities. It has the New York Community Bank, a savings bank established all the way back in 1859, with 225 branches. It also has New York Commercial Bank, which was established in 2005 and has 30 branches, all in Metro New York.
NYCB operates a savings and loans business model. It has $48.8 billion of assets, which makes it the 22nd largest bank holding company in the U.S.
It also has $28.7 billion in deposits, and a $27.1 billion multi-family loan portfolio.
The company performed well in 2016. NYCB had net profit of $495 million, and earnings-per-share of $1.01.
This was a significant recovery from the previous year, when the bank reported a net loss of $47 million. The loss was due mostly to a $141 million debt repositioning charge in 2015.
