The one hundred components of the Dow Jones U.S. Select Dividend Index are “selected to the index by dividend yield, subject to screens for dividend-per-share growth rate, dividend payout ratio and average daily dollar trading volume. Components are weighted by indicated annual dividend.” As of July 31, 2009 the total return for the index was -4.03% and the yield is 4.39%. Utilities account for one fourth of the index. The following is a brief overview of the top ten stocks from this index:

1. CenturyTel Inc (CTL) is a telecom provider with operations in rural and mid-size markets in 25 states. The majority of its business are in Missouri, Wisconsin, Alabama, Arkansas and Washington. The current dividend yield is 9.02% and the market cap is $9.2B. Last year the company had $2.6B in revenues.

If there was ever a minefield investors might want to avoid, the regional banking sector in the U.S. might be it. However, those paid to navigate through it might uncover some opportunities-- companies like First National Bancorp (NYSE:FNB), according to top-rated banking analyst Mike Shafir at Stern, Agee and Leech.

Having been through the eye of the storm, F.N.B. appears to have come through with sufficient capital to conduct its business, consisting primarily of consumer and commercial loans in Pennsylvania and surrounding areas. The company announced a $115-million common equity raise in June that raises tangible common equity relative to tangible assets to 6.0% and its dividend, which was cut in half early this year, and currently yields close to 8%, appears well-covered.

Many of the ten big banks repaid their TARP preferred stock loans on Wednesday, June 17, 2009. This means that they can begin negotiations to repurchase the warrants that they issued to taxpayers. I estimate that the warrants issued by those banks are worth $4.2 billion. That is over one third of the value of the taxpayers' warrants. Yet, if history is any guide, we taxpayers could expect to get 50 cents or less on the dollar. My hope is that the U.S. Treasury will take a hard line in these negotiations and take steps to create markets in the TARP warrants. The best prices will come from taxpayers selling their warrants to third party investors.

One of the problems that plagues the valuation of the TARP warrants is the cancellation provisions. Apparently, to encourage banks to raise equity on their own, the purchase agreements for the TARP capital infusions say that half the taxpayers’ warrants will be cancelled if the bank issues equity in the amount of the U.S. Treasury's investment. Recent valuations by Credit Suisse and Bloomberg have assumed a zero chance of cancellation. These studies systematically overvalue the taxpayer's warrants for this reason. Moreover, they most overvalue the banks which are the most likely to cancel half the TARP warrants. Of the 10 big banks due to pay back TARP yesterday, Morgan Stanley (MS) and Goldman Sachs (GS) have such high share prices and have already issued so much equity that they have a 90 and 80 percent chance respectively of issuing enough equity to cancel half the taxpayer’s warrants by year end, according to my estimates. That means that both Bloomberg and Credit Suisse are overvaluing the taxpayers’ warrants in these companies by 45 to 40 percent, if you believe their estimates of volatility and dividend yield.

William Waller and Jason Stock, founding partners of M3 Funds, recently wrapped up their presentation at the Value Investing Congress, entitled Banks: Have We Seen the Worst of It? The following are our notes.

M3 Funds: Investing in Under-followed Banks

Q4 2008 Earnings Call

January 27, 2009, 8:00 am ET

Q2 2008 Earnings Call

July 22, 2008 8:30 am ET

• Ofheo warns of more GSE writedowns. Fannie (FNM) and Freddie (FRE) regulator Ofheo cautions the GSEs may be hit by more writedowns after they expanded their purchases of subprime and Alt-A mortgages even as other investors fled. The value of their $217B in 'non-agency' debt continues to fall as other firms write down their portfolios. "To the extent that [other] institutions recognize fair value losses on their private-label portfolios under GAAP, Fannie Mae and Freddie Mac may have to do so as well," it says. Freddie's exposure appears to be about twice that of Fannie.
• Fannie, Freddie books under scrutiny. Officials from the Fed and the Office of the Comptroller of the Currency are 'combing' the books of Fannie Mae (FNM) and Freddie Mac (FRE), a source says, to assess the GSEs' financial condition in case the government needs to step in and take them over. Their regulator Ofheo has said their capital remains above regulatory minimums. Treasury Secretary Henry Paulson said Monday he still believes the firms have enough cash, but admitted to some confusion as to whom to believe - the markets or Ofheo.
After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long.
• Apple dives on weak outlook, Jobs's health. Shares of Apple (AAPL) fell more than 10% in extended trading despite EPS and revenue that exceeded analyst consensus after its FQ4 outlook disappointed (see below), and investors continued to fret over CEO Steve Jobs's health. Apple did little to dispel the speculation when the inevitable question came up: "I’m really sorry to ask, because it’s a very private matter, but would you mind addressing" yesterday's NY Post report that called the venerated chief's health into question, Lehman's Ben Reitzes asked during the company's earnings call. "Ben, Steve loves Apple. He serves as the CEO at the pleasure of Apple's board, and has no plans to leave Apple. Steve’s health is a private matter."
• TV's about to get costlier. TiVo (TIVO) is looking to turn the remote control into an electronic credit card. In partnership with Amazon.com (AMZN), viewers will soon be seeing links to buy products like CDs, DVDs and books that appear on, say Oprah, Letterman, The Daily Show - or The Simpsons - during both live programming and commercials.
• GE and Mubadala launch multi-billion dollar global investment fund. GE (GE) is partnering with Abu Dhabi's Mubadala Development Co. in an $8B fund ($4B each) to invest in financial assets hurt by the global credit crunch. The two hope to reach $40B in assets. "We can use our unique financial and industrial capabilities to establish profitable relationships across a number of businesses and we welcome them as a long-term shareholder," GE CEO Jeffery Immelt said.
• Brocade to buy Foundry Networks. Brocade Communications Systems (BRCD) said late Monday it will acquire Foundry Networks (FDRY) for $19.25 in cash and stock. Brocade says the move will help it develop "a networking infrastructure strategy that will serve as the foundation for capitalizing on these dynamic opportunities." Foundry closed at $13.66, and jumped 32% to $18.08 in AH trading. Keep an eye on Foundry's (FDRY) peers: NT, ALU, COMS, JNPR, and FFIV.
• Roche offer attracts analyst scorn. Analysts unanimously decided Roche's (RHHBY.PK) offers to buy the 44% of Genentech (DNA) it doesn't own for $89/share ($43.7B) (a one-day premium of 8.8% and one month premium of 19%) way undervalues the company. Lazard analysts said DNA will likely strive to remain independent, while Bernstein's Geoffrey Porges cautioned a Roche/Genentech link-up would cause "an irrevocable breach in [the pair's] relations," and many DNA top scientists would likely move on if it became a research arm of Roche. Rodman and Renshaw called Roche's $89 opening bid laughable. Shares finished +15% to $93.88, indicating markets tend to agree it's a lowball.
• Vytorin study disappoints. Shares of Schering-Plough (SGP -12%) and Merck (MRK -6%) plunged Monday after their jointly-produced cholesterol drug Vytorin proves ineffective for treatment of aeortic valve disease, and raises cancer red flags. Earnings shortfalls sent the pair further down in extended trading (see below).
• Accounting errors lead to WellCare earnings restatement. WellCare Group (WCG) said after the close Monday it will restate its financial statements from 2004 to Q2 2007 due to accounting errors, which will lead to reduced EPS over some of the periods. Shares gained 6% in AH trading.
• ICSC's weekly retail sales index rose by 0.1%.
• June Leading Indicators: -0.1%, in-line. May -0.2% revised from +0.1%. The decline has moderated, but continues to be widespread.

Earnings: Tuesday Before Open

• Assured Guaranty (AGO): Sees Q2 EPS of $0.42 vs. $0.57. AGO says it's disturbed by Moody's 'possible downgrade' Monday, which it sees as unjustified. [PR]
• Autoliv (ALV): EPS of $1.24 beats by $0.01. Revenue of $1.91B (+10.4%) in-line. [PR]
• Baker Hughes (BHI): Q2 EPS of $1.36 beats by $0.12. Revenue of $3B (+18.1%) vs. $2.76B. [PR]
• BJ Services (BJS): EPS of $.048 beats by $0.08. Revenue of $1.33B (+15.2%) vs. $1.24B. Sees FQ4 EPS of $0.54-0.57 vs. $0.50. [PR]
• Canadian Pacific Railway (CP): EPS of C$1.00 misses by $0.02. Revenue of C$1.22B (+0.4%) in-line. [PR]
• Caterpillar (CAT): EPS of $1.74 beats by $0.20. Revenue of $13.62B (+20%) vs. $12.69B. Shares +2.5%. "Never in my 35 plus years with the company have I seen Caterpillar do so well in the face of such a difficult economic climate in the U.S." [PR]
• Check Point Software (CHKP): Q2 EPS of $0.43 in-line. Revenue of $200M (+13.3%) vs. $195M. [PR]
• CME Group (CME): EPS of $3.93 beats by $0.08. Revenue of $563M (+71.1%) in-line. [PR]
• Corn Products International (CPO): EPS of $0.90 beats by $0.07. Revenue of $1.03B (+20%) in-line. Sees full-year EPS of $3.15-3.35 vs. $3.11. [PR]
• Domino's Pizza (DPZ): EPS of $0.22 misses by $0.01. Revenue of $334 (-1.8%) vs. $332. "Returning to positive sales comps in the U.S. has proven difficult." [PR]
• DuPont (DD): EPS of $1.11 beats by $0.04. Revenue of $8.84B (+12.2%) vs. $8.47B. [PR]
• Ericsson (ERIC): Q2 EPS of 0.60 kroner misses by 0.37. Revenue of 48.53B kroner vs. 48.08B. Operating profit fell to 2.89B from 9.26B a year ago. Margin fell to 10% from 19%. [DJ]
• Fifth Third Bancorp (FITB): EPS of $0.05 beats by $0.05. [PR]
• Forest Laboratories (FRX): EPS of $0.87 beats by $0.07. Revenue of $967M (+4.2%) in-line. Shares -0.4%. [PR]
• Freeport-McMoRan (FCX): EPS of $2.25 misses by $0.19. Revenue of $5.44B (unchanged). Shares -3.2%. [PR]
• Gentex (GNTX): EPS of $0.19 misses by $0.01. Revenue of $170M (+4.3%) in-line. [PR]
• Halliburton (HAL): EPS of $0.68 in-line. Revenue of $4.49B (+20.1%) vs. $4.25B. [PR]
• JetBlue Airways (JBLU): EPS of -$0.03 beats by $0.04. Revenue of $859M (+17.7%) in-line. [PR]
• KeyCorp (KEY): EPS of -$2.70 misses by $0.12, including a previously disclosed $1B tax charge. Will reduce dividend in Q3. [PR]
• Lexmark (LXK): EPS of $0.96 beats by $0.18. Revenue of $1.14B (-5.7%) in-line. [PR]
• Lockheed Martin (LMT): EPS of $2.01 beats by $0.13. Revenue of $11.04B (+3.6%) vs. $10.86B. [PR]
• PACCAR (PCAR): EPS of $0.86 beats by $0.02. Revenue of $3.78B (+10.3%) in-line. Shares -4%. [PR]
• Regions Financial (RF): EPS of $0.39 misses by $0.03. Reduces dividend to $0.10 from $0.38. Shares -4%. [PR]
• SunTrust Banks (STI): EPS of $0.78 beats by $0.14. Revenue of $2.6B (+9.4%) vs. $2.13B. [PR]
• SuperValu (SVU): EPS of $0.79 beats by $0.03. Revenue of $13.35B (+0.4%) vs. $13.19B. [PR]
• UnitedHealth (UNH): EPS of $0.67 beats by $0.03. Revenue of $20.27B (+6.7%) vs. $20.04B. Sees full-year EPS of $2.95-3.05 vs. $2.95. [PR]
• UPS (UPS): EPS of $0.85 in-line. Revenue of $13B (+6.7%) vs. $12.81B. Sees full-year EPS of $3.50-3.70 vs. $3.64. It sees slightly stronger results in the second half. Shares -2.5%. [PR]
• Vodafone (VOD): FQ1 sales of £9.82B (+19.1%) in-line. Sees full-year sales at the bottom of its £39.88-40.7B range; profit outlook unchanged at £11-11.5B. [DJ]
• Wachovia (WB): EPS of $-1.27 misses by $0.49. The loss includes a $6.1B goodwill impairment charge reflecting declining market valuations and asset values. Adds $5.6B to its loan-loss reserve to increase it by $4.2B and cover charge-offs. Cuts dividend to $0.05 from $0.375. Shares -10%. [PR]
• Webster Financial (WBS): Q2 EPS of $0.42 beats by $0.02. [PR]
• Western Union (WU): EPS of $0.33 beats by $0.02. Revenue of $1.35B (+12%) in-line. Sees full-year EPS of $1.29-1.33 vs. $1.28. [PR]
• XM Satellite Radio (XMSR): EPS of -$0.38 beats by $0.03. Revenue of $318M (+14.8%) vs. $323M. [PR]

Earnings: Monday After Close

• American Express (AXP): Q2 EPS of $0.56 misses by $0.27. Revenue of $7.48B (+7.9%) vs. $7.6B. Loss provisions of $1.5B, vs. $640B last year. "In light of the weakening economy, we are no longer tracking to our prior forecast of 4-6% EPS growth." "Consumer spending slowed during the latter part of the quarter and credit indicators deteriorated beyond our expectations." Shares -11%. [PR]
• America Movil (AMX): Q2 profits rise 25% after adding 6.1M new mobile customers. Shares +0.1%. [Reuters]
• Amylin Pharmaceuticals (AMLN): Q2 EPS of -$0.47 beats by $0.02. Revenue of $222M (+12.7%) in-line. Shares -1%. [PR]
• Apple (AAPL): FQ3 EPS of $1.19 beats by $0.11. Revenue of $7.46B (+38%) vs. $7.37B. Sees Q4 EPS of $1 vs. $1.24, and revenue of $7.8B vs. $8.32B. Sold 11.01M iPods in Q3 (+12%); 717,000 iPhones (doesn't include iPhone 3G); 2.5M Macs. Shares -10%. [PR]
• Boston Scientific (BSX): Q2 EPS of $0.20 beats by $0.09. Revenue of $2.02B (-2.3%) in-line. Sees Q3 EPS of $0.14-0.19 vs. $0.13. Shares -5%. [PR]
• Canadian National Railway (CNI): Q2 EPS of C$0.90 beats by $0.04. Revenue of C$2.1B in-line. Shares +2%. [PR]
• Celanese (CE): Q2 EPS of $1.20 beats by $0.06. Revenue of $1.87B (+20.1%) in-line. Sees full-year EPS of $3.60-3.85 vs. $3.98. [PR]
• Equifax (EFX): Q2 EPS of $0.64 beats by $0.02. Revenue of $502M (+10.4%) vs. $508M. Remains confident in full-year performance. [PR]
• Everest Re Group (RE): Q2 EPS of $2.90 misses by $0.37. Revenue of $1.08B (-15%) in-line. [PR]
• F.N.B. (FNB): Q2 EPS of $0.17 misses by $0.10. Shares -8%. [PR]
• Foundry Networks (FDRY): Q2 EPS of $0.17 beats by $0.02. Revenue of $161M (+12.2%) vs. $153.5M. Shares +32% on Brocade (BRCD) buyout. [PR]
• Hercules (HPC): Q2 EPS of $0.54 beats by $0.11. Revenue of $613M +11.6%) vs. $601M. Shares +0.2%. [PR]
• Hexcel (HXL): Q2 EPS of $0.21 misses by $0.03. Revenue of $359M (+24.1%) vs. $337M. Sees full-year EPS of $0.90-0.95 vs. $0.96. Shares -2%. [PR]
• Jacobs Engineering (JEC): EPS of $0.87 beats by $0.05. Revenue of $2.92B (+40.1%) vs. $2.75B. [PR]
• Lincare (LNCR): Q2 EPS of $0.82 beats by $0.10. Revenue of $428M (+7.9%) in-line. Shares +1.5%. [PR]
• Logitech (LOGI): EPS of $0.16 misses by $0.03. Revenue of $509M (+18.4%) in-line. Shares +3.5%. [PR]
• Merck (MRK): Q2 EPS of $0.86 beats by $0.03. Revenue of $6.05B (-1%) in-line. No guidance as it is still assessing the impact of today's Vytorin test results. Shares -7%. [PR]
• Mohawk Industries (MHK): Q2 EPS of $1.29 beats by $0.02. Revenue of $1.84B (-6.9%) in-line. Sees Q3 EPS of $1.06-1.15 vs. $1.40. Shares -4%. [PR]
• QLogic (QLGC): FQ1 EPS of $0.31 beats by $0.02. Revenue of $168M (+30.6%) vs. $162M. [PR]
• Royal Caribbean (RCL): Q2 EPS of $0.40 in-line. Revenue of $1.86B (+6.9%) in-line. Sees FQ3 EPS of $1.65-1.70 vs. $1.64. Plans to reduce spending by $125M/year. [PR]
• SanDisk (SNDK): Q2 EPS of -$0.10 misses by $0.23. Revenue of $816M (-1.3%) vs. $906M. Sees Q3 revenue of $750-850M vs. $1.09B. Shares -14%. [PR]
• Schering-Plough (SGP): Q2 EPS of $0.45 beats by $0.03. Revenue of $4.9B vs. $4.77B. Shares -3.2%. [PR]
• Steel Dynamics (STLD): EPS of $1.05 beats by $0.12. Revenue of $2.4B (163.8%) vs. $2.35B. Sees Q3 EPS of $1.05-1.15 vs. $0.97, and full-year EPS of $3.80-3.90 vs. $3.46. Shares +2%. [PR]
• Texas Instruments (TXN): Q2 EPS of $0.44 misses by $0.02. Revenue of $3.4B (-2.2%) in-line. Sees Q3 EPS of $0.41-0.47 vs. $0.51 and revenue of $3.26-3.54B vs. $3.56B. Demand slowed unexpectedly in June as distributors did not restock. Shares -11.5%. [PR]
• Volterra Semiconductor (VLTR): Q2 EPS of $0.25 beats by $0.07. Revenue of $28.7M (+55.3%) vs. $27.5M. Shares +1%. [PR]
• Woodward Governor (WGOV): FQ3 EPS of $0.47 beats by $0.04. Revenue of $330M vs. $309M. Sees full-year EPS of $1.75 vs. $1.67. Shares +5%. [PR]

Today's Markets

• Asia closed mixed Tuesday, with Tokyo up sharply after a day off on Monday. Nikkei +3% to 13,185. Hang Seng flat at 22,527. Shanghai -0.5% to 2,846. BSE +1.8% to 14,105.
• Europe markets are sharply lower at midday. London -1.75%. Paris -1.2%. Frankfurt -1%.
• Futures have not recovered from the post-close drop on weak earnings. Dow -1%. S&P -0.9%. Nasdaq -1.9%. Crude -0.1% to $130.86. Gold +1% to $973.

Q1 2008 Earnings Call

April 18, 2008 11:00 am ET

Q3 2007 Earnings Call

October 19, 2007 11:00 am ET

These are banks trading at or below tangible book value:

To begin this topic, let’s see what dividend is. According to Investopedia, dividend is

Distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders. The dividend is most often quoted in terms of the dollar amount each share receives (i.e. dividends per share or DPS). It can also be quoted in terms of a percent of the current market price, referred to as dividend yield.

Although the big advantage to investing in these stocks is the much higher yield than a passbook account, the significant risks should be considered. First, if interest rates rise, the profit margins on their fixed loans will be squeezed. Second, most banks issued a substantial number of ‘risky’ loans [high loan to equity, low credit quality, etc] over the last few years. In addition, a continued drop in housing prices would lead to more foreclosures. One other important factor to be careful of with regards to many of these bank stocks, is the lack of liquidity. For example, NB&T Financial Group Inc. (NBTF) hasn’t traded since December 12. And because of the illiquidity, the bid and asked spread can be very wide.