Despite the recent financial troubles of MNC Financial Inc., the bank holding company, announced that it will keep its quarterly dividend at 29 cents per share.
In a four-paragraph announcement yesterday, MNC also said that its board of directors approved a plan to sell up to $180 million of cumulative convertible stock to its biggest shareholder, Alfred Lerner, a Cleveland businessman and MNC director.
MNC, Maryland's largest banking company, is the parent company of Maryland National Bank and American Security Bank in Washington.
With the stock price closing yesterday at $7.50 a share, the dividend represents a 15.5 percent annual yield. The dividend is payable Sept. 28 to stockholders of record Sept. 21.
MNC stock has been particularly volatile in the last few weeks as speculation has grown about whether the bank holding company would keep its dividend at the previous level. Trading at $9 a share Aug. 20, the stock dropped to a low of $5.75 a share by Sept. 6. At midday today, the stock was trading at $8.125, up 5/8 over yesterday's close.
At its peak last fall, the stock was trading at $29.31 1/4 , adjusted for a 2-for-1 split.
The company had a net loss of $74.7 million in the second quarter as a result of loans in the faltering commercial real estate market.
In the last few months, MNC has launched various plans to raise additional capital. Besides the sale of convertible stock to Lerner, MNC announced in mid-August that the bank was putting up for sale MNC Credit, its commercial finance and leasing subsidiary.
David S. Penn, a bank analyst for Legg Mason Wood Walker Inc., said the retention of the dividend comes as a surprise in view of MNC's efforts to increase its capital. But if the dividend is being kept with the concurrence of regulators, who are now examining the bank, "I would view that as good news," Penn said.
MNC spokesman Daniel Finney declined to discuss the regulators' position on the dividend.
Penn said he is still cautious about MNC stock and is advising investors to neither sell nor buy the stock.
Kyle Prechtl Legg, a bank analyst at Alex. Brown Inc., also said the dividend announcement does not mean that the company is out of trouble. "It's still an open question whether it [the dividend] can be maintained moving forward," she said. "We still need to know what the regulators have to say."
But Legg was heartened that the company decided to keep the dividend as the Office of the Comptroller of the Currency is doing an examination. "It indicates that at least it's not a blow-up and you have a good, viable company," she said.
The much-awaited dividend announcement was made after a long board meeting that stretched from the morning to nearly 5 p.m. yesterday.
MNC also announced that the board decided that starting with the fourth quarter it will make dividend declarations in the month following the end of the quarter.