Since it announced a plan to merge with Astoria Financial (NYSE:AF), New York Community Bancorp (NYSE:NYCB) has had many analysts worried that it will be lowering its dividend yield.

The merger would catapult NYCB across the $50 billion asset threshold and establish NYCB's status as a systematically important financial institution, which changes its regulatory compliance requirements.

What does this mean for investment returns for NYCB shareholders? Fool analysts Gaby Lapera and John Maxfield discussed the implications of the deal . Listen to their full podcast by clicking here. A full transcript follows the video.

 

Gaby Lapera: Right, and just to throw in kind of a red herring, I've seen some kind of superficial analysis this week saying, "Oh, this is a bad deal because New York Community Bancorp is going to have to lower their dividend yield." That doesn't make this the reason that it might be a bad deal. They were going to have to lower their dividend yield rate anyway because that's what they would have to do. They needed that money to acquire another bank.

John Maxfield: Yeah and the other thing to keep in mind is that -- and this is really where that change in the dividend policy came in -- is that New York Community Bancorp has been sitting at about $49 billion worth of assets for quite a while -- I think a year, two years. And it was preparing itself to cross that $50 billion threshold. And that $50 billion threshold when you're talking about banks is really important because that is the difference between a systematically important financial institution and a non-systematically important financial institution.

And once you cross that threshold, you have higher regulatory and compliance costs. And New York Community Bancorp is getting ready for those things and has now gone past that. Well, another consequence of being a systematically important financial institution is that the Federal Reserve now has the right to veto your capital allocation plans -- i.e., how much you want to distribute via dividend, how much in terms of your common stock you want to repurchase.

So now you New York Community Bancorp is in this position to where it used to be able to distribute as much money as it wanted, right? But now it can't because now you have the Federal Reserve sitting on top of it that's probably going to veto anything that it considers to be excessive in terms of the dividend payout ratio.

So it is a negative aspect of the deal from an income-seeking investors' perspective, but for the fundamental business model, that really doesn't change anything. It just changes the dynamics of its stock.

Lapera: Definitely. I think this is to be a really interesting stock to wait and see what happens.

Gaby Lapera has no position in any stocks mentioned. John Maxfield has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.