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First Niagara Financial Group Inc. (FNFG), M&T Bank Corporation (MTB), Capital One Financial Corp. (COF): One Great Dividend You Can Buy Right Now

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Capital One Financial Corp.Dividend stocks are everywhere, but many just downright stink. In some cases, the business model is in serious jeopardy, or the dividend itself isn’t sustainable. In others, the dividend is so low, it’s not even worth the paper your dividend check is printed on. A solid dividend strikes the right balance of growth, value, and sustainability.

Today, and one day each week for the rest of the year, we’re going to look at one dividend-paying company that you can put in your portfolio for the long term without too much concern. This isn’t to say that these stocks don’t share the same macro risks that other companies have, but they are a step above your common grade of dividend stock. Check out last week’s selection.

This week, we’ll turn our attention to the Northeast and take a closer look at retail and commercial bank First Niagara Financial Group Inc. (NASDAQ:FNFG), and I’ll show you why I think it has all the tools necessary to become an income investors’ dream stock.

Sacked by the recession
There’s really no beating around the bush: The recession absolutely zonked the retail and commercial banking sector. Many banks have since rebounded from their credit quality woes, but the recovery has proved particularly slow in the Northeast, where the housing market remains weak relative to other parts of the country.

M&T Bank Corporation (NYSE:MTB), which is nothing short of a giant in the Northeast banking scene, in 2009 saw its adjusted net income plunge 40% and its average return on assets fall despite a rise in net interest margin. Simply put, if M&T Bank Corporation (NYSE:MTB) was struggling, there was little chance that smaller banks were going to come out of the recession unscathed.

Source: Myfuture.com, Flickr.

The First Niagara advantage
Shareholders have been subjected to a bit of a double-edged sword in First Niagara Financial Group Inc. (NASDAQ:FNFG)’s rebound from its lows. Banks that had the capital to take advantage of weaker banks looking to raise cash or simply shed non-core assets set themselves up in a big way following the recession.

Capital One Financial Corp. (NYSE:COF) took this to heart by announcing the purchase of ING Group‘s ING Direct U.S. operations for $9 billion in 2011. The deal gave ING some much needed capital while ridding it of what appeared to be a non-core U.S. asset while giving Capital One Financial Corp. (NYSE:COF) exposure to ING Direct’s vast network of ATMs located primarily on the East Coast.

First Niagara Financial Group Inc. (NASDAQ:FNFG)’s approach was similar, but unfortunately for shareholders it did come with a bit of short-term pain for what should be a lot of long-term gains. First Niagara Financial Group Inc. (NASDAQ:FNFG) orchestrated a deal in 2011, as well, to purchase 195 branches located in the Northeast from HSBC Holdings plc (ADR) (NYSE:HBC). Under the terms of the deal, U.S. regulators required First Niagara to sell about 20% of the branches so it didn’t maintain too much of a monopoly in certain parts of the state of New York, selling most of these branches to KeyCorp (NYSE:KEY) for $110 million and helping reduce some of its purchase price. Without the cash for the deal, First Niagara Financial Group Inc. (NASDAQ:FNFG) was forced to halve its dividend and turn to a dilutive share offering to raise cash.

I know that might sound like the antithesis of what would make a great dividend stock, but hear me out before you close the book on First Niagara.

In its latest quarter, First Niagara Financial Group Inc. (NASDAQ:FNFG) delivered EPS of $0.18, reversing a year-ago loss of $0.05 per share as nearly all facets of its business improved. The bank saw its fee income operations jump 7% and its average commercial loans increase by 10% quarter over quarter for the 14th straight quarter. Most importantly, net charge-offs fell by two basis points to 0.33% from the previous year, pointing to a credit portfolio that’s ripe with high quality retail and commercial loans.

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