Bank Research

In this post, I will show the research I have done pursuant to my idea that I should short common stock with high dividends that will be shorted as a hedge by preferred stock buyers when the dividend drops. Here is what I looked at:


Bank: Preferred Yield: Common Yield: Short Interest: 52-wk. High/Low: Current Price: Bounce from Low:

Regions
Financial (RF) 9.0% 8.5% 7.2% $17.21/$35.91 $16.68 0%

Citigroup (C) 8.5% 5.8% 2.2% $17.99/$54.49 $21.42 19%

Fannie Mae
(FNM) 8.25% 5.2% 10.7% $18.25/$70.57 $26.72 46%

Freddie Mac
(FRE) 8.25% 3.9% 10.7% $16.59/$67.68 $24.58 48%

Merrill Lynch
(MER) 8.63% 3.2% 4.2% $37.25/$92.93 $41.89 12%

Key Corp. (KEY) 9.0% 7.7% 3.2% $18.89/$37.09 $18.74 0%

Fifth Third
(FITB) 9.0% 9.4% 6.1% $17.91/$43.20 $17.35 0%

National City
(NCC) 12% 0.7% 18.6% $5.44/%35.12 $5.55 2%

Wachovia (WB) 7.5% 6.3% 6.1% $22.72/$54.54 $21.92 0%

WaMu (WM) n/a, # 0.4% 18.3% $8.72/$44.60 $8.75 0%

Sovereign Bankcorp
(SOV) n/a 3.5% 6.5% $6.48/$23.35 $9.23 42%

Bank of America
(BAC) 8.125% 7.5% 1.5% $33.12/$52.96 $33.31 1%

# - latest offering was a below market price private offering of common shares. I guess this is what happens after the dividend is cut and there's no money to pay a yield.


Analysis

Actually, it looks like I missed the boat here with the best-looking stocks (RF, KEY, FITB) all at their 52-wk. lows. C, FNM, and BAC look fairly good, but I've already gotten two out of those three.

Conclusion

I checked where National City was at when they cut their dividend: $8.33. The time to sell these off is when they announce their dilutive offerings. WaMu jumped 30% on a short squeeze when they announced that they had been rescued by a $7 billion bailout including a common share private placement at $8.75. Guess what? That's where they closed today. I'm close to taking a profit on this, but I'm waiting for some more fear in the market.