They were overcapitaized after the secondary conversion. They have more than enoughto support the existing business model at this juncture and this is borne out by the stock buyback program also occurring.While I agree that in the long term they need to get backto a payout of 50% or less, they have been building income steadily. At one point they paid over 100% of income in the dividend and the fact that they are now at 85% makes it less likely that they wil l cut the dividend at this time.
I am thinking that the money managers don't like it because they can't make a lot of money on a company that executes a steady gradual business plan. Watch any stock and you will see that the price volatilty is generally where the action is because they make most of their profit via short term arbitrage. The growth for most of the financials other than the ones that were totally crushed at the bottom of the cycle and a few unusual cases has not really been not that big. The only time you really see swings with Peoples is just before and after earnings are announced. But for individuals that do not actively trade to take advantage of short term price swings and those who do not have visions of doubler sugar plum fairies, this one is a reasonable option to CDs or treasuries given its 5% dividend and adequate capitalization.
Sometimes I just don't understand the marketplace. The company is well poitioned in its primary market, has been growing revenue albeit slowly and has not made any huge missteps unlike the big banks. Given the ability to sustain its 5.1% dividend and the crummy income alternatives I would expect a bit more enthusiasm.
They slightly beat analysts estimates this past quarter. There is a disconnect between what the investment community wants from them and what they are delivering. I know their business plan is not real exciting, but they are profitable and have a clearly defined niche in the northeast which they have been gradually growing. Personally a 5.6% dividend yield based upon the current stock price is not shabby given the options.
Unbelievable. The stock price was already discounted to anticipate weak earnings, met or exceeded the analyst projections, and the price gets hammered. As an aside, the efficiency ratio improved. And most banks are not portfolioing residential mortgages, but selling them on the secondary market because the rates are so low. I know the yield is better than overnight deposits, but if you hold them because of the short term yield advantage, you get killed 3- 4 years down the line when rates increase to where they really should be if the fed was not flooding the market with liquidity. If you try to sell them at that point you take a big hit on the discount. These folks are in the northeast which does not have a robust growth economy so I respectfully disagree with the comment that thier growth is below expectations. Personally when I look at the missteps of the nationals with one outrageous revelation after another, am pleased to see these folks sticking to their comfort zone and making careful steady progress. You are not going to see them do anything real dramatic. Not their culture, but all in all I said it before and say it again, a great dividend with growth.
Very respectable results. ROA is over 1% and they are now earning more than they pay out in dividends (85%) so the naysayers that babbled about the need to cut the dividend were wrong. Stock has a book value of $15 a share and it pays a dividend in excess of 5% based on the current stock price. I am okay with a slow growth predictible stock that appears to be executing its business plan as opposed to the mega banks which have been looking for quick ways to pump earnings resulting in very ugly headlines as their missteps come to light!
I agree whole heartedly. Given the rates being paid on CD's these days, the 5% dividend is not a bad return while you wait for the eventual sale.
That is a rather open ended statement, and while I agree since the industry as a whole continues to conoslidate, I am not so sure it is something that will happen in the near term.
A lot of banks have started to increase fees to offset both the low interest rate the fed has kept short term rates at and recent limits/ elimination of fees they can charge for various things such as ATM and overdraft fees. This had caused them to reevaluate what products are profitable such as depository accounts that average a lower balance than they deem they need. The theory is that the smaller depositors/low value accounts will either pay the fees or leave. Most banks have loss leader products so you should be able to find a competitor with a better deal on their checking account products. In particular, savings banks and smaller institutions are likely going to be offering some low fee and no fee products that would be a good alternative.
I guess if the "non recurring" expenses did not mysteriously pop up every quarter with unerring regularity I would be a bit happier.
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.
At $1.50 a month its $18 a year which is bearable and it appears that there are ways to avoid it at People's. The Bank of America fee is $5 a month which equates to $60 a year and I suspect the minimum balance they will expect of their "premium accounts" to waive it is going to exclude the 99% club.
Right now they have plenty of cash to pay the dividend while they increase earnings. I assume that the recent drop in price to some extent is a function of some investors thinking they will cut the dividend which is propping the stock price given 5% current yield. They are close once again to fully covering the dividend from current earnings and once they surpass it the price should begin to rise because that arguement will have been taken off the table. If they do a special cash dividend right now, not only will they go from a very well capitalized bank with dry powder for unanticipated surprises as well as future acquistions, but there would be a more legitimate arguement that they should cut the dividend which would hurt the price. The only ones that would benefit from a special dividend at this point are the folks that want to pocket it and then dump their shares.
and how did you expect them to have an earnings blowout? This is a conventional bank which does not do investment banking deals where it can earn big fees. They actually did quite well considering the general economy and the New England economy in particular
I am very pleased with the progress and am not suggesting they cut the dividend, which sets a floor on the stock price. However, I did think it comical that they raised the dividend by 1 cent so they could report 19 consecutive increases in dividends. It was not substantive from an investment standpoint and I would have preferred they held it at the existing level and wait until earnings once again exceed dividend payout before making an increase.
Well, lets not get too euphoric. They still are earning less on an annualized basis than they will be paying in dividends. On the plus side they beat the anaylst estimate handily and for the first time in many quarters the after hours price did not plummet after earnings were announced. Now who said pigs can't fly?
This is an overcapitalized bank with a fairly conservative loan underwriting culture which is why they have been so slow to deploy money from the secondary conversion. While it has resulted in less than impressive earnings growth, it protects their downside. Not sure what foreign oil issues have to do with this specific stock which will probably be one of the survivors if things do get real ugly. I guess that in general if things get ugly it is fair to say that the overall stock market will suffer in which case I would suggest you sell what you have and put your money under a mattress.
The acquisitions have been very sensible from a geographic standpoint with a fill in of markets in their existing foot print and in contiguous areas. While not on the cheap, the acquisitions have been done with a combination of cash and stock which has preserved their cache of cash. For the time being there is sufficient cash to fund the dividend as the income builds back up to a level which is self sustaining. While not sexy from a opportunistic standpoint in terms of forgone opportunity to acquire failed banks on the the cheap, the overall plan is sound and will ultimately produce both solid income and value. Once the banking sector recovers sufficiently, if they do not provide reasonable shareholder value they will become a nice target for someone either looking to enter the northeast or consolidate their hold there. I think this will provide a decent return over a 3-5 year period for those patient enough and the downside does not appear to be very significant.
You can't use the secondary IPO as the total warchest since they had excess capital before that event. They have 4.5 billion in liqudity and about $3.1 billion in surplus (above the 10% capital ratio they need to maintain). Total capital is 5.1 bilion and with $21 billion in footings they need 2.1 billion in capital. Assuming it has gone down a bit since the Smithtown acquisition lets say they have $2.5 billion of surplus which is a boatload of dry powder. While they could eventually burn through it if earnings don't go up, the company will go into play long before that happens if they cannot boost earnings over the next 3 years in an amount sufficient to cover the dividend shortfall. Not my preferred outcome but not a total disaster either.