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People's United Financial Inc. Message Board

  • serpentine290 serpentine290 Jul 31, 2010 10:02 AM Flag

    You are buying the dividend.

    PBCT is paying 4.5% dividend, about $.60/share. But it is earning only about 2% or $.24/share. The difference is paid out of the company treasury. The company treasury is the money that was raised during the last offering. That money is reflected in the share price. When you buy PBCT you are buying part of that "warchest". The "warchest" represents about 2 bil of the 5 bil market cap. You are paying 40% of the purchase price for the fund that they are using to "pay" your dividend. When the dividend is paid, the money is deducted from the share price. When the dividend is greater than earnings, the difference is paid to you with your own money. Maybe PBCT is a good long term hold or a even a good buy. But you have to believe that with a 2% dividend because that is all you are getting.

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