Dime Community Bancshares, Inc.

Dime Community Bancshares ( DCOM - Snapshot Report ) is benefiting from a steepening of the yield curve and improving credit trends. This has prompted analysts to revise their earnings estimates higher, propelling the stock to a Zacks #2 Rank (Buy).

Based on the consensus estimates, analysts expect 8% EPS growth in 2011 and 5% growth in 2012.

The company also pays a dividend that yields 3.7% - a dividend that held steady throughout the financial crisis of 2008-2009.

Company Description

Dime Community Bancshares operates 25 branches throughout Brooklyn, Queens, the Bronx and Nassau County, New York. It was founded in 1864 and had $4.0 billion in assets as of December 31, 2010.

Fourth Quarter Results

Dime recently reported its results for the fourth quarter. Earnings per share came in at 31 cents, missing the Zacks Consensus Estimate by 2 cents. It was a 29% increase over the same quarter in 2009, however.

Net interest income increased 9.5% as the net interest margin (which is essentially the spread between the interest it takes in on loans and what it pays out on deposits) increased 23 basis points to 3.71%. .

Banks like Dime Community have certainly benefited from the Fed keeping short-term rates at historic lows (which your savings account is tied to) while long-term rates have begun to move higher (which mortgage rates are tied to).

The company also benefited from a 27% decline in the provision for loan losses as net charge-offs declined 59%. Nonperforming loans as a percentage of total loans increased, however, from 0.33% to 0.58%. Much of this increase was driven by a 267% increase in non-performing commercial real estate loans.

Estimates Moving Higher

Analysts raised their estimates following solid fourth quarter results. The Zacks Consensus Estimate for 2011 is $1.34, 8% above 2010 EPS. The 2012 estimate is currently $1.41, equating to 5% growth.

It is a Zacks #2 Rank (Buy) stock.

Attractive Yield

Dime pays a dividend that yields an attractive 3.7%.

The company has paid a quarterly dividend of 14 cents every quarter since 2004 - even during the financial crisis.

Valuation

Shares trade at just 11.3x forward earnings, a discount to the industry average of 16.2x. Its PEG ratio of 1.5 is based on a projected 7.5% five-year growth rate.

The company's price to book ratio of 1.6 is above the industry average of 0.9, but still within value territory.

Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.