A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Columbia Banking System, Inc. (NASDAQ:COLB) has paid dividends to shareholders, and these days it yields 2.7%. Does Columbia Banking System tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Want to help shape the future of investing tools and platforms? Take the survey and be part of one of the most advanced studies of stock market investors to date.
5 checks you should use to assess a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it the top 25% annual dividend yield payer?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
Does Columbia Banking System pass our checks?
The current trailing twelve-month payout ratio for the stock is 48%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 49% which, assuming the share price stays the same, leads to a dividend yield of around 3.5%. Moreover, EPS should increase to $2.69.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Relative to peers, Columbia Banking System generates a yield of 2.7%, which is on the low-side for Banks stocks.
Considering the dividend attributes we analyzed above, Columbia Banking System is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three essential aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for COLB’s future growth? Take a look at our free research report of analyst consensus for COLB’s outlook.
- Valuation: What is COLB worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether COLB is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.