Building passive income streams is a smart way to make your money work for you. One great way to generate passive income is by investing in companies that consistently pay high dividends.
These can also be solid stocks to own because companies strive to maintain dividends even if the market is in a slump. For this reason, dividend payers tend to be high-quality companies that manage their capital wisely.
One stock that has performed well relative to its peers in downturns and delivers a high dividend yield is New York Community Bancorp (NYCB -0.81%). Investing $1,500 in this stock would net you about $100 in passive income annually. Here's what you should know about this high-yielding bank stock.
A high-quality housing lender in New York City
New York Community Bancorp has 230 branches across five states, including New York, New Jersey, Florida, Ohio, and Arizona. Its primary business provides loans for multifamily properties in New York City. It specializes in nonluxury, rent-regulated markets in which the average rent prices are below the market rates. The bank has operated in this niche for more than 50 years, building up expertise and relationships along the way.
Investors are at the moment are concerned about a slowing economy and the potential for a recession in the near future. This could impact lending activity and repayments on bank loans. However, New York Community Bancorp has seen its loans perform well over time in various credit cycles. The bank has outperformed its peers over the past 30 years, as measured by nonperforming loans, even through the Great Recession in of 2007-09.
It recently beat earnings estimates
New York Community Bancorp recently announced earnings and beat analysts' top- and bottom-line estimates by 6% each.
The bank increased its loans by 15% from last year, driven by growth in multifamily financing and a strong rebound in specialty finance lending. Multifamily loans were up 11%, to nearly $37 billion. Specialty financing loans were up 97% to $4.1 billion. Businesses take out these types of loans for equipment financing or short-term loans that allow them to purchase inventories.
As a result, New York Community Bancorp increased its net interest income by 8% from last year, boosted by higher interest rates and increased lending. Diluted earnings per share (EPS) grew 13% in the process.
What to watch for from this high-yield dividend payer
New York Community Bancorp hasn't increased its dividend in several years, but it does deliver its investors an excellent dividend yield of 6.4% annually -- more than nearly all of its banking peers.
The company has struggled to deliver solid returns for investors over the past decade, and it's looking to transform the business to turn the ship around. To do this, it plans to broaden its deposit base and expand into new lending verticals.
One way it will speed up this process is by acquiring Flagstar Bancorp, which has branches across California, Indiana, Michigan, and Wisconsin. The $2.6 billion deal was announced in April 2021 but is still awaiting the green light from regulators. Once the deal is approved, it would expand New York Community Bancorp's deposit base and make it a top-six mortgage banker and mortgage-servicing business.
Assuming the merger goes through, New York Community Bancorp's high yield and expanding business could make it a solid passive income stock to include as part of your diversified portfolio.