At the time of this writing, the component stocks of the S&P 500 had an average dividend yield of 1.93%. That's low when compared to the index average just shy of 4.5% over its nearly 100-year history. But just because the market is producing such a historically low yield doesn't mean your portfolio has to as well. To boost your yields, consider these three financial stocks with above-market dividend yields.
1. Banco Latinoamericano de Comercio Exterior S.A
Banco Latinoamericano de Comercio (BLX 1.30%), commonly called Bladex, is a commercial bank that sports an impressive 5.1% dividend yield.
The bank is headquartered in Panama City, Panama, and primarily provides trade financing to businesses, countries, and other financial institutions in Latin America and the Caribbean. This includes term loans, lines of credit, deposit accounts, letters of credit, and even more complex structured finance products.
Financially, the bank is strong and should be able to maintain its dividend. It has a high Tier 1 capital ratio of 16.2% and reported a 12.6% return on average equity as of the first quarter of 2015. The bank's ratio of seriously delinquent loans to its total assets was a respectable 0.32% for the same period. Bladex likewise has an exceptional efficiency ratio of 31%.
2. Northwest Bancshares
Serving the retail banking needs of Pennsylvania, western New York, eastern Ohio, and Maryland, Northwest Bancshares (NWBI 0.65%) is a small regional bank with a current dividend yield of 4.6%.
The bank has a strong capital base with a Tier 1 capital ratio of 14.8%, per its most recent regulatory filing with the FDIC as of Mar. 31. It is also profitable, though its earnings are low relative to both the bank's equity and assets. For the first quarter, return on average equity and assets were 6.17% and 0.83%, respectively.
The high capital levels provide a buffer for the relatively low level of profitability, but going forward management must take more steps to drive return on equity and return on assets to more acceptable levels.
In the interim, though, the bank's dividend yield looks stable. Northwest Bancshares is doing a good job reducing the level of problem loans and foreclosures on its books, a necessary task before profitability can climb to more satisfactory levels. The bank was able to lower its loan loss provision by 88% year over year, indicating that management has engineered a dramatic improvement in its problem loan portfolio.
3. The Carlyle Group
Shifting gears from the traditional banking business, The Carlyle Group (CG) is an investment firm with exposure to private equity, hedge funds, bonds, and a variety of other direct and indirect investment vehicles. Business is good for Carlyle, allowing the firm to pay an attractive 4.3% dividend, according to Yahoo! Finance.
Carlyle's financial success primarily stems from the total assets the firm manages on behalf of others, along with the fees earned from managing those assets. At the end of the first quarter, the investment firm reported $192.7 billion in assets under management. Of those assets, $129.4 billion generated management fees.
In the first quarter, Carlyele earned economic net income of $273 million on a pre-tax basis. Economic net income is the accounting metric generally used to describe profitability for investment firms such as Carlyle. The actual accounting is complex, but it includes both realized and unrealized gains from the firm's various investments, along with fee income from managed assets.
Carlyle distributes a large percentage of its income as dividends as a normal course of business, making it a consistent choice for investors in search of yield. Its current performance indicates investors should feel reasonably comfortable that today's dividend yield will remain strong for the foreseeable future.
Whatever your flavor of choice -- Latin American trade finance, traditional regional banking, or Wall Street style investment management -- these three stocks each offer an attractive dividend worth a closer look.
