Wednesday, January 02, 2008

National City Bank: The Dangers of Chasing Yield

I feel as though I am piling on by writing about National City Bank's (NCC) dividend cut announcement. In any event NCC announced today that the company was reducing the quarterly dividend by nearly 49%. The new quarterly dividend was reduced to 21 cents per share versus 41 cents per share in the prior quarter. On a year over year basis, the dividend was reduced from 39 cents per share in the first quarter of 2007. Prior to the dividend cut, NCC was trading at a yield of 9.96%. After the cut, the stock trades at a yield of 5.39%. In trading today, the stock price fell 5.29%.

It should be noted that National City was featured by Standard & Poor's as one of the 195 companies in the S&P 1500 Index that had increased the dividend annually for the past 10-years.

(click on chart for larger image)

National City Bank stock chart January 2, 2008

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