With Peoples United soon to be regulated by the Comptroller of the Currency the high dividend payout will undoubtedly be cut back. The regulators will want a more realistic payout ratio...........not the 100% or more of earnings per share.
While no one can completely understand the regulator's issues and concerns which are a moving target, generally their hot buttons are soundness and safety, and adequate capital cushion. PBCT is conservative so I will assume the primary issue regarding dividends would pertain to how it impacts capital. They have been improving profitability and were paying the current level when it exceeded earnings. That was because this is a very very well capitalized institution and ratios well exceed statutory levels. The dividends did not endanger the bank's capital adequacy and now that earnings is about equal to dividends I see less issue to challenge the current payout level. Hopefully as they get better economies from recent acquisitions ("merger costs" should go away) profitability will continue regardless of ongoing weakness in the economy.
PBCT is the second most heavily shorted bank stock with a ratio of 3.37. The currently high indicated dividend doesn't seem to be dissuading the shorts in any way, so I have to conclude that they're betting on a dividend cut in the near future. Nothing will bring this stock down faster then a dividend cut regardless of the rest of the market.
This has been my biggest concern with this company for a long time. It seems to me that there's little chance for a substantial increase in earnings in the present economic environment, therefore a dividend cut appears to be a good possibility. Unless management can pull a rabbit out of a hat....... well, you get the picture.