1 Amazing Dividend Stock

There's no question that New York Community Bancorp is an amazing and high-yielding stock. But what's the secret to its success?

Mar 12, 2014 at 7:10AM


If you own shares of New York Community Bancorp (NYSE:NYCB), then pat yourself on the back. This under-the-radar lender is one of the best banks in America.

What makes it so exceptional? The obvious answer is its dividend. Not only does it yield 6.2%, which is more than twice that of Wells Fargo (NYSE: WFC) or JPMorgan Chase (NYSE: JPM), but it's also committed to maintaining its generous payout.

You can see this in the chart below, which shows New York Community Bancorp's quarterly payout has served as a model of stability over the past decade. This was even the case during the financial crisis, when other marquee lenders slashed their distributions to preserve capital.

NYCB Dividend Chart

But saying New York Community Bancorp is exceptional because it unfailingly pays out a large portion of earnings glosses over a more substantive question: How is it able to do so?

The answer to this is simple -- or, at least, it's simple in theory. In short, the New York City-based lender doesn't underwrite bad loans. In fact, according to CFO Thomas Cangemi, the company has never dipped into capital to cover credit losses throughout its entire public life.

The secret is in the bank's business model, which relies to a large extent on financing multifamily, rent-controlled buildings in the New York City metropolitan area. As Cangemi explained last month,

Our lending niche is highly profitable, extremely efficient, and the quality of the loans produced, if done conservatively, is resilient to credit losses and drastic changes in a local economy. [...] Rent-regulated buildings are more likely to retain their tenants and their revenue stream during downward credit cycles. Our focus on multi-family lending in the niche market contributes to our record quality of assets and are clearly less costly to originate and produce.

The takeaway here is straightforward. Good banks don't underwrite bad loans. And banks that don't underwrite bad loans are windfalls for investors. As somebody who studies banks, I wish it was more complicated than that. But it isn't, and the sooner investors come to this realization, the better.

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John Maxfield has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of JPMorgan Chase and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

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