There has been a high level of scrutiny for large banks. Many customers have been distraught with the way large institutions have treated them. The larger banks are also more exposed to European debt and still have plenty of toxic assets. That's why its good as an investor to diversify amongst the smaller banks, which often tend to be shareholder friendly as well. The following five small banks have been paying large dividends to its shareholders and this trend should continue.
Astoria Financial Corporation (AF) operates as the bank holding company for Astoria Federal Savings and Loan Association that provides various banking and financial products and services in the United States. It engages in generating deposits and originating loans.
Astoria is trading at a P/B of .65. Last year, Astoria made more than $200m in free cash flow, which is fairly good considering the current market cap is around $800m. Astoria is also trading at 20% discount to its net tangible assets. The stock has a forward P/E of 13.59 and pays a nice 6% dividend.
New York Community Bancorp, Inc. (NYB) operates as a multi-bank holding company for New York Community Bank and New York Commercial Bank, which offer banking products and services in New York, New Jersey, Ohio, Florida, and Arizona. It primarily engages in generating deposits and originating loans.
NYB is trading right at book value. The company made more than $600m in free cash flow in 2011. The stock has a forward P/E of 11 and the stock pays a nearly 8% dividend. Its also important to note that while the dividend is large, the company generates plenty of cash flow to cover the payments.
People's United Financial, Inc. (PBCT) operates as the bank holding company for People's United Bank that provides commercial banking, retail and business banking, and wealth management services to individual, corporate, and municipal customers.
PBCT trades at a P/B value of .82. The company does not generate as much cash flow as other small banks, but its important to note that the bank has plenty of growth ahead. In just the past few years, the bank has been strengthening its balance sheet. The company has a great management team, which refused taxpayer money during the financial crisis. The stock has a forward P/E of 13 and pays a 5% dividend.
Hudson City Bancorp, Inc. (HCBK) operates as the bank holding company for Hudson City Savings Bank that provides retail banking services in the United States. Its deposit accounts include passbook and statement savings accounts, interest-bearing transaction accounts, checking accounts, money market accounts, and time deposits.
HCBK is trading at a P/B of .75. Last year, the company almost generated a $1 billion in free cash flow. Thats pretty impressive considering the current market cap stands around $3.5 billion. The stock has a forward P/E of 12 and pays a 4.5% dividend.
First Niagara Financial Group, Inc. (FNFG) operates as the holding company for First Niagara Bank, N.A., which provides retail and commercial banking, and other financial services to individuals, families and businesses.
FNFG trades at a P/B of .62. FNFG is a great bank because it was able to grow revenue at a rapid pace through the financial crisis. It grew its revenue by almost 70% from 2008 to 2010. While the company's debt may seem alarming, it is mainly taking on debt because of acquisitions. It recently purchased 27 branches from HSBC for a $1 billion. These acquisitions will grow the bottom line so there should not be a cause for concern there. The stock has a forward P/E of 9 and pays a 3.3% dividend.
Disclosure: I am long NYB. I may initiate a position in Astoria Financial (AF).