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It looks like Columbia Banking System, Inc. (NASDAQ:COLB) is about to go ex-dividend in the next 4 days. You can purchase shares before the 4th of August in order to receive the dividend, which the company will pay on the 19th of August.
Columbia Banking System's next dividend payment will be US$0.28 per share, and in the last 12 months, the company paid a total of US$1.48 per share. Looking at the last 12 months of distributions, Columbia Banking System has a trailing yield of approximately 5.0% on its current stock price of $29.39. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Columbia Banking System paid out 54% of its earnings to investors last year, a normal payout level for most businesses.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Columbia Banking System, with earnings per share up 6.1% on average over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Columbia Banking System has delivered an average of 43% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
From a dividend perspective, should investors buy or avoid Columbia Banking System? Columbia Banking System has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.
If you're not too concerned about Columbia Banking System's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, Columbia Banking System has 3 warning signs (and 1 which is potentially serious) we think you should know about.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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