FYI - NYCB is my largest holding and has been for over 10 years. I love the dividend and respect the management team for making it through the financial crisis in better shape than others.
However most on this board are missing the point on the dividend yield being so high and consistent over the past 10 years. I love the consistent ~6% return that it pays. It even compensates for the drop in stock price over some time periods and makes you feel good when the yield number is closer to 14% when it falls to 10.
But over the past 10 years, NYCB is down 20%. The S*P is up 80%. That is just a fact. NYCB is going down 2% per year based on stock price, while the S*P is going up 6% per year. Factor in about a 2% dividend yield on the S*P gets you to 8%. Factor in the NYCB yield of 6% and you only get to 4% per year. So the S*P is doing 8% vs NYCB 4% over the past 10 years. You can make this as complicated as you want by adding in dividend reinvestment, the tax impact of the divy you get from NYCB each year being higher, etc. Bottom line is NYCB stock price dramatically under-performs the broader market over the past 10 years.
I love the dividend. I respect the bank and the team. But rationally, over the past 10 years, they have been underperforming. I have too much of a tax hit from dumping my position (it goes back to one of their older acquisitions) to get out now, but realistically, this is not one of my better performing investments. If I had shifted the hole position into a S*P ETF I'd be in better shape.
As an aside, NYCB does look considerably better if compared to a banking specific benchmark over a 10 year period. That would be down closer to 25% vs NYCB 20% and wouldn't make up for that with the higher dividend. But against a broader index, NYCB is not a good investment. Given the track record over 10 years, I don't see why anyone would expect NYCB to outperform the S*P over the next 10 years.
if you are looking for great growth, this is not the stock for you. However, if you are looking for solid income. tthis is a stock that can be relied upon I have a very large position and always add on deep dips and have owned this bank since the IPO. I lived in Roslyn, was a depositer, knew Mr. Ficalora, who was president then and still is and when the stock went public, he told me never to sell.
Sentiment: Strong Buy
Good post. Thanks. I’ve got 4K shares brought between June 2011 and September 2012. My current total return, including dividends, is about 33% (excluding taxes on the dividends). Prorating the Dow Jones Index based on my NYCB share quantity and purchase dates, it’s up about 50%. In other words, if I had put the same amount of money into the Dow at the same times, I would be up 50% versus 33% for NYCB. But I bought NYCB for the relative security of the dividend, knowing I could possibly have a lower total return than if I invested in an index. No question I would like to see the share price go up, but I hold for the dividend. If anything disrupts the dividend, the stock will tank. Again, thanks for the thoughtful post.
Interesting thoughts that you bought NYCB for the security of the dividend. I really hope its secure. It has been through the bad times so I have to anticipate that it will continue to do so. If they can pay out $1 per share when making less than that (still can't quite figure that one out) a few years ago, then I guess they can continue to do so now that the make $1.10. And as I said I'm long and hopeful and not going anywhere. But looking at this from the outside as a new investment, I'm not sure I would charicterize a company with a 90+% dividend payout ratio as having a safe dividend. Here is hoping.
So they have returned 10 per share for you and counting. What does that do for your real cost per share? for example if you bought at $16 10 years ago you have gotten $10 of that back , means those shares have really only cost you $6 share. With the stock selling at 16 it's really returned 150% (minus dividend taxes) with Zero capital gains tax. . Not a bad return if you compare it to a stock with no dividend that you would have to pay taxes on when you sell it. .
Teerod88 - I don't think you are looking at this correctly. The point is not whether I have made a return. The question is where you should put your $$. You are correct if you look at it from the perspective of dividends can be thought of as reducing your original purchase price. 10 years ago NYCB was at 18. 10 years of dividends can be looked at as dropping it to 8 so at 16 today, you can think of it as a 100% return. That is actually only a 7% annual return. Let's leave out taxes because you would pay taxes each year on the dividends rather than letting them ride in getting a lower dividend stock and getting the gain in cap gains - which is better because paying taxes later is always better. The point is that if you invest instead in an S&P index fund 10 years ago, lets assume it was also at 18, its up 80% so its at about 33. Using your logic that dividends reduce your original purchase price, the 2% dividend each year reduces cost by about 3.50. So my investment went from 15.50 to 33. Still a better return than NYCB. I'd argue the SP is more diversified and the dividend is more secure, so its actually lower risk than NYCB so better return and lower risk.