By Roger Choudhury, Lead Editor
We screened for companies with dividend yields above 5%, and looked for low EBT margins, slowing revenue growth or low returns on capital. We’d identified 4 stocks that could be heading to the dividend graveyard. For our other graveyard picks, see here.
Hudson City Bancorp (HCBK) has a ~6% dividend yield to keep current investors. For Q3 2010 and Q4 2010, EPS came in at $0.25 each, which were lower than the EPS in Q3 2009 and Q3 2010 of $0.27 and $0.30, respectively. Revenue growth slowed to 6.01% in 2010, after increasing by 34.36% in 2009. The company posted an EPS of $1.09 in 2010, and consensus 2011 EPS estimate range from $0.62 to $0.92.
On March 2, the company suggested that regulators may force it to raise capital, reduce its interest-rate risk and find more sources of funding because the bank has too much exposure to shifting interest rates.
The bank, based in Paramus, New Jersey, has $61 billion in total assets and is one of the largest US thrifts to survive the 2008 financial crisis.
Valley National Bancorp (VLY) had low returns on invested capital of 2.85% in 2010 and 2.04% in 2009. Revenue growth slowed from 22.99% in 2009 to 6.23% in 2010. Before then, revenue growth was negative or in the low single digits, going back to 2003. EPS came in at $0.81. For 2011, the range of estimates is $0.75 to $0.89.
Shareholders of record on March 15 will receive $0.18 on April 1, which is a current yield of 5.1%.
Valley is a regional bank holding company with over $14 billion in assets, headquartered in Wayne, New Jersey. Its principal subsidiary, Valley National Bank, currently operates 198 branches in 134 communities serving 14 counties throughout northern and central New Jersey, Manhattan, Brooklyn and Queens. Valley National Bank is the largest commercial bank headquartered in New Jersey. Valley National Bank offers a wide range of deposit products, mortgage loans and cash management services to consumers and businesses including products tailored for the medical, insurance and leasing business. For some preferred bank stocks we like, see here.
Capitol Federal Financial (CFFN) had returns on invested capital of 1.69% and 1.64% in FY 2010 and FY 2009, respectively. The company’s fiscal year ends in September. After revenues jumped by 25% in FY 2009, they fell by 0.61% in FY 2010. Also, Q1 2011 had a net loss of $11 million. In comparison, Q1 2010 drew in $21 million in profits.
EPS came in at $0.41 in FY 2010, and estimates for FY 2011 range between $0.36 and $0.42. The company paid $1.016 in dividends in FY 2010.
On February 22, the Board of Directors declared a welcome dividend of $0.60 per share on all outstanding shares of CFFN common stock. The dividend is payable on March 25, 2011 to stockholders of record as of the close of business on March 11, 2011.
John Dicus, CEO of Capitol Federal Financial said:
We are pleased to announce, after working with the Office of Thrift Supervision, the declaration of the $0.60 per share welcome dividend. Our ability to declare this dividend speaks to the strength of our balance sheet, strong capital position and the quality of the assets we have. Also, this dividend reaffirms our commitment to returning value to all stockholders.
This makes up for the dividend cut to $0.075 for Q1 2011. However, we expect no more special dividends in FY 2011.
The company is the holding company for Capitol Federal Savings Bank. Capitol Federal Savings Bank is a federally charted stock savings bank founded in 1893 and is headquartered in Topeka, Kansas. Capitol Federal Savings Bank has 46 branch locations, 11 of which are in-store branches, serving primarily the metropolitan areas of Topeka, Wichita, Lawrence, Manhattan, Emporia and Salina, Kansas and a portion of the metropolitan area of greater Kansas City.
Regal Entertainment (RGC) raised its quarterly dividend from $0.18 to $0.12 because of confidence in its business model. This gives a current yield of 6.1%. The company also paid a $1.40 special dividend in Q4 2010. It would be a stretch for the company to pay out a special dividend of that nature in FY 2011.
Revenues fell by 2.97% in 2010, after rising by 4.4% in 2009, 4.16% in 2008, and 2.43% in 2007. The EBT margins were also razor thin: 4.49% in 2010, 5.43% in 2009, and 4.45% in 2008.
EPS was $0.50 in 2010, and the range of estimates for 2011 is from $0.44 to $0.96.
The company is the largest motion picture exhibitor in the United States. The Company’s theatre circuit, comprising Regal Cinemas, United Artists Theatres and Edwards Theatres, operates 6,703 screens in 540 locations in 37 states and the District of Columbia. Regal operates theatres in 43 of the top 50 U.S. designated market areas.
Disclosure: No positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.