Thursday, January 13, 2011

NYB not quite a dividend machine but worth a look.

New York Community Bank symbol NYB has been a favorite of mine. It does not meet my criteria for a dividend but it barely misses. I love these types of stocks.

NYB yields 5.44%

but has not increased that dividend since 2004 which is why it is not a dividend machine. Prior to 2004, NYB increased the dividend several times. However, at 5.44% and holding steady, I can enjoy owning this bank.


I do not want to buy the big banks. They do not even come close to being dividend machines. This does not mean that they will miss the mark forever, but for now, they are too unstable for an investor who needs personal income to replace working income. Therefore, let us look to participate in the trend of improving banking through a regional bank with a solid balance sheet and a very good dividend.


Moreover, NYB has another way to make income, covered calls.Today, NYB was priced at about $18.50 a share. For each one hundred shares, you own you can sell a covered call (you sell the option to buy your stock to another person) at a strike price of $20 (the price they pay you for the stock) for a premium (the amount of money you receive) of $.25 per share. The person can buy NYB from you at any time until April 2011 for $20 a share. You pocket the $.25 a share no matter what happens.

With this great small, regional bank, you do not care. Buy it at &18.50; sell the call for $.25 get the dividend of $.25 in February and take an 10.80% gain if they buy it from you; or keep a stock that is paying you 5.44% on your investment.
 

Look for companies like this to fund your cash flow strategy and take the money to the bank!
Very Truly Yours,
TheMoneyMadam