I understand that some of the banks in this ETF will cut their dividends. But, what am I missing here?
You're missing the website's assumptions and the equity's dividend history.
As was pointed out to me by another poster, KRE puts out a somewhat lumpy dividend:
21-Dec-07 $ 0.963
21-Sep-07 $ 0.468
15-Jun-07 $ 0.554
16-Mar-07 $ 0.269
15-Sep-06 $ 0.382
I think many financial sites multiply a quarterly dividend by four, divide by the last close, and call it some weasel words like Fidelity's "Dividend Yield (Annualized)". So at the 31 Mar closing price of $35.14 that 96-cent dividend works out to a 10.96% annualized dividend, which is exactly what Fidelity is quoting.
Yet the historical dividend yield is more appropriately quoted as (.269+.554+.468+.963)/$35.14= 6.4%. Which is what SSGA has been quoting.
A disquieting bit of additional data is that the fund kinda seems to have missed issuing a March 2008 dividend. Hmm. Maybe it's been declared but not yet distributed and won't be updated until it's credited on Wednesday?
http://www.ssgafunds.com/library/capb/ETF_Dividend_03.19.2008REVCCRI1206026814.pdf
Brewer has pointed out before that many of these regional banks are more exposed to local loans given to construction companies than they are to subprime mortgages. The two Hawaii banks in the index, Bank of Hawaii & Central Pacific, have both staunchly declared that they're maintaining their dividends. So the banks may drop their dividends if told to. But despite the Treasury Sec's stern words I suspect that most of them will hold out until the regulators hunt them down and start beating them publicly.
We bought our shares last July at a cost basis of $42/share (which was an unbelievable bargain back then, let alone today) and we've been reinvesting the dividends. We'll hold on for another year or two and then see whether we sell for tax losses or donate the profits to charity. I've certainly demonstrated that I'm early to the party and that I cannot call a bottom.