NYCB - 1 Stock I Wouldn't Touch With a 10-Foot Pole
2024-07-20 16:03:00 ET
I'm no stranger to companies that are facing short-term problems. I often buy shares of such businesses because the headwinds they face have resulted in attractive stock prices and high yields. New York Community Bancorp (NYSE: NYCB) attracted my attention at first, but it quickly became clear that this regional bank's troubles are too deep for me to bother with the stock. Here's why.
When I'm considering investing a stock, I prefer to focus on companies with strong businesses that appear to be temporarily out of favor on Wall Street. My main process for finding such companies is to first look for ones with long histories of annual dividend increases, which I believe is a rough indicator of a strong business. Then I pull out those with historically high dividend yields, which I consider an approximate measure of value.
What I try to figure out at that point is why the dividend yield is so high. There are times when a high yield indicates a fundamental problem with the business. That's what keeps me away from Altria , given the ongoing declines in its most important business (cigarettes). But then there are other companies where the issues being faced seem likely to be temporary. An example of that in my portfolio would be Bank of Nova Scotia , which has been trying less than successfully to expand in South America. Due to its strong Canadian foundation, I bought in. Now, it has a plan to refocus on only the best markets in South America. I'm fine with that and my thesis for owning it still holds up.
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1 Stock I Wouldn't Touch With a 10-Foot Pole