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New York Community (NYCB) in Focus on 8% Dividend Yield

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Solid dividend-yielding stocks are highly desirable amid imminent recession risk. One such stock is New York Community Bancorp, Inc. (NYCB - Free Report) .

This Hicksville, NY-based bank offers traditional and non-traditional financial products and services, and access to multiple service channels, including online and mobile banking. A large portion of the company’s multi-family and commercial real estate loans are concentrated in the Metro New York region.

Since 2016, NYCB has been paying a quarterly dividend of 17 cents per share. So, considering last day’s closing price of $8.50, the company’s dividend yield stands at 8%. This is impressive compared with the industry average of 2.61% and attractive for income investors as it represents a steady income stream.
 

Is the New York Community stock worth a look to earn a high dividend yield? Let’s check out the company fundamentals to understand risk and rewards. This will help us make a proper investment decision.

Apart from regular quarterly dividend payouts, NYCB has a steady share repurchase program in place. In 2018, the board of directors approved a $300-million share-buyback program and had $9 million remaining under this authorization as of Sep 30, 2022.

New York Community has grown through a series of acquisitions over the years. Also, after much delay, the company wrapped up the buyout of Flagstar Bancorp Inc. earlier this month, thus becoming the 24th largest regional bank (based on assets) in the United States.

On a proforma basis, as of Sep 30, 2022, NYCB would have had $88.4 billion of assets, $66 billion of loans, deposits of $58.3 billion and total stockholders' equity of $9.3 billion. The combined entity will operate through almost 400 branches across a nine-state geography, including in the Northeast and the Midwest, with exposure to high-growth markets in the Southeast and West Coast.

The deal is also expected to bolster NYCB’s non-interest income, which had been declining over the past several years. Exit from mortgage banking and wealth management operations and lower retail banking fee income were some of the key reasons behind this dismal picture. While the metric was relatively stable in 2021, it recorded a 9% year-over-year improvement in the first nine months of 2022. Now, the acquisition of Flagstar Bancorp will put more emphasis on non-interest income growth and reduce dependency on net interest income (constituting 95.4% of NYCB’s total revenues at nine-month ended Sep 30, 2022).

Further, the Flagstar Bancorp deal is expected to improve the New York Community’s funding profile and lower the cost of deposits. This will likely turn out to be all the more beneficial amid the current higher interest rate regime, as NYCB has a liability-sensitive balance sheet.

These factors aside, NYCB aims to grow deposits through numerous strategies, including further advancement in its existing borrower base, expansion into the BaaS space and additional partnerships with fintech companies. Deposits recorded a five-year (2017-2021) CAGR of 4.8%, with momentum persisting in the first nine months of 2022.

Thus, despite concerns like its liability-sensitive balance sheet and rising expenses, NYCB stock is fundamentally solid, and the Flagstar Bancorp acquisition is expected to further support its financials. Also, the stock has lost 30.4% so far this year and is currently trading just 3.3% above its 52-week low, making a compelling “buy on the dip” choice.
 

Zacks Investment Research
Image Source: Zacks Investment Research

Therefore, income investors must keep this Zacks Rank #3 (Hold) stock on their radar as this will help generate robust returns over time. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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