City Holding (CHCO) is a Top Dividend Stock Right Now: Should You Buy?
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
City Holding in Focus
Based in Charleston, City Holding (CHCO) is in the Finance sector, and so far this year, shares have seen a price change of 7.46%. The bank holding company for City National Bank of West Virginia is currently shelling out a dividend of $0.6 per share, with a dividend yield of 2.73%. This compares to the Banks - Southeast industry's yield of 2.12% and the S&P 500's yield of 1.6%.
In terms of dividend growth, the company's current annualized dividend of $2.40 is up 3.4% from last year. In the past five-year period, City Holding has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.88%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. City Holding's current payout ratio is 40%, meaning it paid out 40% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for CHCO for this fiscal year. The Zacks Consensus Estimate for 2022 is $6.55 per share, which represents a year-over-year growth rate of 15.72%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that CHCO is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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