National City Corp (NCC) should not be affected by the subprime fallout. The sale of First Franklin coupled with the ongoing acquisitions in Florida including Harbor Florida Bancshares Inc. and Fidelity Bancshares Inc. should immunize NCC from any downturn. Mortgage risks are low as NCC has not engaged in subprime loans and regularly resells prime loans on the primary mortgage market.
NCC is diversified with a loyal customer base. The Banking sector should experience competitive pressure on margins over the next twelve months. A loyal customer base should mitigate the difficulties and expansion in higher growth areas should provide additional revenue replacing lower mortgage revenue.
NCC has maintained a high dividend payout ratio over the past decade, ranging from 31% to 58% of earnings. We anticipate a decrease in 2007 EPS to $3.00 due to the successful Dutch auction of 75M shares in 02/2007. The share count has increased and revenue should increase however, EPS is likely to decline. For 2007, the dividend yield will most likely remain above 4%. Institutional investors find the dividend history attractive.
For the private investor: NCC is a long term hold, low risk, dividend class stock with little price volatility.
NCC 1-yr chart
Disclosure: no conflicts.