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Posts Tagged ‘HCBK’

Hudson City Bancorp – Yielding Total Return for Options Writers

October 14th, 2009 5 comments

HCBK:NDQ - Oct. 13, 2009 Close: $13.17 

52-week range: $7.46 (Mar. 9, 209) - $18.93 (Nov. 4, 2008) 
Dividend = $0.15 quarterly = 4.55% current yield   hcbk-logo

Hudson City Bancorp, Inc. offers offering traditional deposit products, residential real estate mortgage loans and consumer loans. In addition, the Company purchases mortgages and mortgage-backed securities and other securities issued by United States government-sponsored enterprises. Its revenues are derived principally from interest on its mortgage loans and mortgage-backed securities, and interest and dividends on its investment securities. They have about 131 branches in NY, NJ, and CT. HCBK converted from a chartered mutual savings bank into its current form in two stages. The first came in 1999 and the final step took place on June 7, 2005. 

In direct contrast to almost all other banks Hudson City posted record earnings in 2008 and is on track for another all-time high in EPS for 2009. In fact, 2009 will likely be the ninth consecutive year of improved earnings and increased dividends. This is quite a feat in light of the past few years housing market. 

As of year-end 2008 about 99% of HCBK’s loans were first mortgages and just 1% were consumer and other loans. They managed to sidestep the worst of the carnage through the use of old time banking standards. Forbes magazine called them “The Best Managed Bank in America” in both 2007 and 2008. 

Here are their impressive (split adj.) per share numbers as reported by Value Line: 

Year Mort. Loans EPS Div. B/V Avg. P/E Avg. Yield
2001 17.19 0.21 0.07 2.02 16.6x 2.1%
2002 21.19 0.31 0.11 2.14 17.4x 2.0%
2003 23.28 0.35 0.16 2.18 24.1x 1.9%
2004 27.96 0.40 0.22 2.35 28.1x 1.9%
2005 32.99 0.48 0.27 8.83 23.8x 2.4%
2006 46.60 0.53 0.30 8.84 24.9x 2.3%
2007 65.11 0.58 0.33 8.89 23.9x 2.4%
2008 74.49 0.90 0.45 9.43 19.1x 2.6%

First half 2009 earnings per share were $0.52 versus $0.40 and Zacks now sees 2009 – 2010 EPS at $1.05 and $1.15 respectively. That puts HCBK’s multiple at< 12.6x this year’s and under 11.5x next year’s estimates. Compare those P/Es with all the historical valuations in the chart above. HCBK shares are near the cheapest they’ve ever been. 

Dividends were initiated in 2000 and have been raised in each year since. The current yield of 4.55% is better than the interest rates on bank CDs, treasury notes and virtually everything else without high risk. It’s also the best yield in HCBK’s history as seen from the chart above. 

Value Line notes Hudson City’s financial strength as B+ and gives them 90th percentile rankings in both ‘stock price stability’ and ‘earnings predictability’ (with 100th being best). HCBK shares have outperformed 80% of the 1700 stocks in Value Line’s research universe on a long-term basis. Morningstar sees ‘fair value’ for Hudson City as $15/share. 

A rebound to just fourteen time 2010 estimates of $1.15 would see HCBK back above $16 /share within about 15 – 18 months. Add in the generous dividend yield and this looks like an attractive total return stock. 

Is a $16 target price reasonable? Sure. HCBK shares touched highs of $16.10, $25.00 and $15.90 in calendar 2007-2008 and 2009 YTD. With earnings and dividends now better than ever before, there is no reason these shares shouldn’t attain at least their old highs. 

Here’s a way to play with even less risk… 

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Banking on a TARP-free Name - Hudson City Bancorp

May 11th, 2009 1 comment

hudson-city-bankHudson City Bancorp [NDQ:HCBK] May 11, 2009: $12.75 10:50 AM EST
52-week range: $7.46 (Mar. 9, 2009) - $20.97 (Sep. 19, 2008)
Dividend = $0.15 quarterly = 4.71% current yield

Hudson City was considered a shining star of the banking industry as recently as last summer due to its conservative lending practices during the housing market insanity. HCBK requires a 20% minimum down payment on its mortgage originations. The shares actually hit an all-time closing high of $20.97 /share as recently as last September.

Unlike most banks and thrifts, Hudson City’s EPS continued to grow in both the December and March quarters. Zacks now looks for 2009 – 2010 earnings of $1.05 and $1.15 versus the $0.90 posted in 2008.

HCBK took nothing from the TARP funds as it didn’t need external capital. Their net interest spreads have widened with the cost of depositor funds near an all-time low.

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