(By Rich Bieglmeier) One of the byproducts or writing about and analyzing stocks is that friends and associates ask some variation of "what stock should I buy?" That's such a dangerous question without knowing a lot about the questioner's taste for risk, time horizon, goals…
In this article, we'll answer the question with the following criteria, a dividend stock that pays more than 4%, low volatility as defined by beta, earnings growth so that the dividend has a chance of increasing, a declining payout ratio so that any hiccup won't result in a dividend cut.
According to the trusty stock screener, there are 876 publicly traded companies that pay a dividend in excess of 4%. Six hundred and sixty-one of the 876 have a beta that is less than one. The S&P 500 has a beta of one. So, the 661 are considered less volatile than the S&P 500 using beta. Next up, let's make sure the bottom line is getting fatter. The number of companies that have grown profits per share by more than 5% for the past five-years is 99 – getting closer. There seems to be something about sixes and ones as 61 companies' payout ratios have declined.
We don't want any illiquid stocks. Let's look for stocks that trade at least an average of 100,000 shares a day, 30 remains. Ok, value is important how many trade for less than 1.5 times their book value? 15.
Throw the 15 into the chart screener, since we don't want something that already so stretched out that a correction is due in the near-term. And, we don't want anything that's currently moving lower.
Checking… checking… checking…
Ok, financial stocks are hot right now and New York Community Bancorp Inc.'s (NYCB) chart shows potential upside to $14.75 – 8% upside as we type. Add in the savings and loans' 7.4% dividend, and NYCB's offers total return potential of more than 15%.
New York Community Bancorp has paid an uninterrupted dividend since September, 1994 and has paid out $1 per share a year since April 2004. Analysts following the mid-cap financial expect earnings to continue growing nearly 5% a year for the next three-to-five-years; so, maybe a small dividend hike is possible.
Price-to-book (P/B) was one of our screens, and by its five-year historical average, NYCB is reasonably valued. The street values New York Community Bancorp at 1.06 P/B while its five-year average P/B is 1.147. Coincidentally, or not, the 8% discount matches the stock chart's upside target.
Overall: Dividend-centric investors might find New York Community Bancorp Inc. (NYCB) an attractive idea. With a beta of 0.82, the stock should gyrate less that the S&P 500 and offer an attractive total return package for buy-and-hold types.