Dividend Seekers Can 'Bank' on These Stocks

Volatility is back in the stock market, as investors have become increasingly concerned about inflation, rising interest rates, and the potential of a new coronavirus variant. In times of elevated market volatility, investors can turn to dividend stocks to increase their income. High-yield dividend stocks can help create a buffer of consistent income. And, many financial stocks will actually benefit from rising interest rates, which will allow them to earn more on loans and invested capital. New York Community Bancorp , Western Union , and Unum Group are three top financial stocks, that all have high dividend yields above 5%. Branch Out: New York Community Bancorp New York Community Bancorp is the parent of a state-chartered bank called New York Community Bank. The wholly owned subsidiary operates 236 branches in New York, New Jersey, Ohio, Florida, and Arizona. The holding company was founded in 1993, but the banking operations of the company can be traced to 1859. The bank focuses on multi-family loans in New York City, particularly in buildings that are rent-controlled. That book of business is about three-quarters of its entire lending portfolio. The company has assets of approximately $58 billion. In the 2021 third quarter, total revenue was $333 million, up 13% year-over-year. Adjusted diluted earnings-per-share came to $0.31, up 35% year-over-year. Credit loss provisions came to a benefit of $1 million, vs. losses of $13 million a year ago reflecting continued improvement from the pandemic-driven recession last year. The bank's efficiency ratio was 38.9%, which is very strong. Net interest margin was up 15 basis points to 2.44% year-over-year, but declined sequentially due to lower prepayment income. Total loans held for investment rose $858 million to $43.7 billion year-over-year. NYCB's deposit mix is very strong for an environment where rates are moving around. About 40% of its deposits are in time deposits, so those rates are locked in until maturity. In addition, strong deposit growth should help NYCB pay down more expensive borrowings and improve margins, along with strong expense controls. New York Community Bancorp is not a high-growth company. However, in return investors receive a high dividend yield of 5.5%. This puts the stock near the top of the financial sector in terms of yield. And, the dividend appears to be secure, with a 2021 expected dividend payout ratio of 54%. Go West-ern Union Western Union is a global leader in domestic and international money transfers. The company has a network of approximately 550,000 agents globally and operates in more than 200 countries. The company operates three business segments: consumer-to-consumer, business solutions, and other (bill payments in the U.S. and Argentina). Approximately 86% of revenue is now from the consumer-to-consumer channel. The company had around $4.8 billion in revenue in fiscal 2020. Western Union is also not a high-growth company, but its results have proved to be stable. In the most recent quarter, company revenue grew 2% to $1.29 billion. Earnings per share increased 4% to $0.57 in the quarter. Growth was driven by double-digit increases in digital money transfer revenue and business solutions, offset by weakness in retail money transfer. Digital money transfer volume increased 19% while business solutions revenue rose 31%. These two segments represent the company's most important growth catalyst in the years ahead, as it faces increasing competition in traditional retail money transfers. Despite the heightened level of competition, Western Union remains a leader in the industry. Its competitive advantage stems from its consumer-to-consumer business and unrivaled network of agents that process transactions. The company strengthens its network effect with partnerships and its digital money transfer app. A strong balance sheet is an additional competitive advantage. Western Union has a fairly conservative debt level with $2.85 billion of long-term debt that is offset with just over $1 billion in cash. The company has a high interest coverage ratio of about 9.6-times, and a fairly low leverage ratio of 1.5-times. While investors should not expect a high earnings growth rate in the future, the company generates strong profits, which fuels its hefty dividend payout. Western Union updated earnings per share guidance in 2021 to $2.05 - $2.10. This represents a 2021 dividend payout ratio of approximately 45%. This leaves enough cushion for the company to continue paying its dividend, even during recessions. Shares currently yield 5.3%. Good Benefits With Unum Group Unum Group is an insurance holding company providing a broad portfolio of financial protection benefits and services. The company operates through its Unum U.S., Unum U.K., Unum Poland and Colonial Life businesses, providing disability, life, accident, critical illness, dental and vision benefits to millions of customers. In 2020 the company generated $13.2 billion in revenue and provided $7.6 billion in benefits. The company performed relatively well in 2020, which has resulted in difficult comparisons for 2021. For example, in the third quarter, Unum generated revenue of $2.970 billion compared to $2.996 billion in Q3 of 2020. A small increase in premium income was offset by a decline in net investment income. On an adjusted basis, earnings-per-share equaled $1.03 compared to $1.21 in Q3 of 2020. That said, Unum has remained highly profitable and continues to grow book value, which is a key metric for financial stocks. Unum's book value equaled $54.39 per share at the end of the third quarter, compared to $53.50 per share in the year-ago period. Due to the company's consistent growth over time, Unum has increased its dividend for 13 consecutive years. The most recent increase was a 5.3% dividend hike in July 2021. Shares currently yield 5%. Analysts expect Unum to generate $4.41, according to consensus estimates for 2021. With an annualized dividend payout of $1.20, this means Unum has a 2021 dividend payout ratio of approximately 27% for the current year. This indicates a very safe dividend payout.

Dividend Seekers Can 'Bank' on These Stocks

New York Community Bancorp, Western Union, and Unum Group all have dividend yields above 5%. Let's look at each.

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