Continuing with my goal to build a portfolio of high-yield companies, last week I bought New York Community Bancorp Inc. (NYCB).
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I wanted to buy this stock when it broke the resistance that was at about $16.50 (half of April) when the price took some days to break that resistance that was created on January 2014. After the break-out, the price kept on increasing and during the months of June/July took a pause at about $18. Finally last week, the price has had another great boost and I have decided to buy. I've decided to buy because of the dividend yield.
The Yield
The company is paying its shareholders a yield of 5.27% a year, with a payout ratio of 91%. The yield has been as high as 5.40% and as low as 3.07% during 2000, so the current yield of 5.27% did not grow at all during the last 15 years. Regardless, I want to focus on the average yield of the last 15 years. It has been as low as $1.65 and as high as $10.25 that means it has had an average ratio of 5.95% during the last 15 years.
If you bought $1,000 of NYCB 15 years back, now you would have $892 of free cash just thanks to the yield (almost a 100% of return).
The Company
The Company is multi-bank holding company and has two main subsidiaries: New York Community Bank and New York Commercial Bank. New York Community Bank is a New York State-chartered savings bank with 242 branches that currently operate through seven local divisions. The Company is producer of multi-family loans in New York City, with an emphasis on non-luxury apartment buildings that feature below-market rents. In addition to multi-family loans, which is the principal asset, the Company originates commercial real estate loans and, to a much lesser extent, acquisition, development, and construction loans, and commercial and industrial loans.
Price, returns and ratios
The price has risen by 21% during the last 12 months, 8% during the last 5 years and just 4% during the last 10 years. The price didn’t do any change and got stuck on the trading range between $10 and $20. The P/E ratio is $17.47 that is ranked lower than 66% of other companies in the Global Savings & Cooperative Banks industry.
The company has positive returns, ROE of 8.40% and ROA of 1.01% that are at an average level when compared to the company’s history and even if we compare them to the industry’s average.
Recent events
The strength of their earnings and capital have been supported by the quality of their assets which has been consistently superior. In the second quarter of 2015, they reported their best asset quality measures since the second quarter of 2008. Much of the improvement was due to the sale of a single OREO property. It had a sales price of $55 million, which generated a pretax gain of $7.8 million in the second quarter of this year.
Since last September, they sold $1.6 billion loans and more than $1.1 billion, or 68%, were multi-family and commercial real estate loans, and the vast majority of them had been through participations, given the quality of their loans and the status of their multi-family loans as CRA credits. This is the great competitive advantage of NYCB; it lends money to the owners of large, rent-controlled multifamily buildings located in NYC area.
New York Community Bancorp CEO, Joseph Ficalora, during a conference commented this way the business of the company:
“We consider ourselves a niche lender. We lend to a particular kind of owner, on a particular kind of product, at a particular structure that has a very conscious awareness of the actual value of the prescribed cash flow. So the cash flows in our buildings do not typically go down during the cycle terms. The cash flows in our buildings actually continue to go up even when there are great vacancies in the market place and unemployment is extremely high in the New York market and so on. We in fact see our buildings actually increasing in value because their rent rolls actually increase.”
Hedge-Funds
James Barrow (Trades, Portfolio) is the main hedge fund holding shares of the company with 2.84% of outstanding shares or 0.29% of his total assets. Kahn Brothers (Trades, Portfolio) hold 0.69% of outstanding shares of the company and this is a very big investment for them since it is the 9.48% of their total assets.
Since the beginning of the year, Jim Simons (Trades, Portfolio), John Buckingham (Trades, Portfolio), James Barrow (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio) increased their stakes of NYCB while Mario Gabelli (Trades, Portfolio) and Kahn Brothers (Trades, Portfolio) reduced their stakes by 3% and 9%.
