3 Liquid Bank Stocks With Highest Dividend Yields (Update 1)

Tickers in this article: PBCT FFBC NYB VLY

Updated with comments on the "fiscal cliff" from FBR financial policy analyst Edward Mills.

NEW YORK ( TheStreet) -- Even though the "fiscal cliff" may put a damper on dividend income, many bank stocks are paying dividend yields that are especially attractive in the prolonged low-rate environment.

With the presidential election has been settled, FBR financial policy analyst Edward Mills wrote on Wednesday morning that although "it will take several days for the full narrative of the election to develop, we view the result as significantly increasing the volatility related to the negotiations on the 'fiscal cliff.' With a slim margin for the President and Republican control of the House, both sides could argue that they have the upper hand in negotiations and will view the election as a validation of their positions."

The "fiscal cliff" refers to the expiration of tax cuts enacted when George W. Bush was president and extended by President Obama in August 2010, as a result of negotiations with Republican members of Congress to raise the federal debit ceiling. Without further action from the President and Congress, the tax cuts will be reversed, and there will be major federal spending cuts, which many economists believe will push the U.S. economy back into recession.

Mills said that with President Obama being reelected, while the Rebublicans maintained control over the House of Representatives, "We do believe that the chances of going off the cliff (at least temporarily and before a deal is reached to punt) has increased."

For income-seeking investors, the biggest immediate headache if we fall off the fiscal cliff will be the elimination of the 15% maximum federal income tax rate on qualified dividend income. Investors will need to carefully analyze investment options according to their federal and state tax scenarios.

Of course, with interest rates being so low for so long, many investors will still find many common stocks, including bank stocks, with attractive dividend payouts, when compared to other income investment alternatives.

TheStreet last month used a conservative approach to identify five bank stocks that are actively traded with relatively safe dividends, as the group had paid dividends of less than 60% earnings over the previous 12 months. This group was also limited to stocks rated a "Buy" by TheStreet Ratings .

This time we have simply identified the three actively traded banking names with the highest dividend yields based on regular quarterly payouts, without considering the dividend payout ratio, ratings, or even the level of profitability. This "stick to the wall" approach provides a list of names with very attractive dividend yields, most of which have paid dividends nearly equal to their earnings over the past year.

Then again, the group is solidly profitable, and even the Federal Reserve appears set to allow some of the large banks facing the greatest scrutiny to pay out a high percentage of earning next year.