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It looks like Columbia Banking System, Inc. (NASDAQ:COLB) is about to go ex-dividend in the next four days. You can purchase shares before the 9th of February in order to receive the dividend, which the company will pay on the 24th of February.
Columbia Banking System's next dividend payment will be US$0.28 per share, on the back of last year when the company paid a total of US$1.34 to shareholders. Based on the last year's worth of payments, Columbia Banking System has a trailing yield of 3.4% on the current stock price of $39.88. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Columbia Banking System paid out more than half (51%) of its earnings last year, which is a regular payout ratio for most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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 4.9% 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. In the past 10 years, Columbia Banking System has increased its dividend at approximately 42% a year on average. 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.
To Sum It Up
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. It doesn't appear an outstanding opportunity, but could be worth a closer look.
With that being said, if dividends aren't your biggest concern with Columbia Banking System, you should know about the other risks facing this business. For example, we've found 2 warning signs for Columbia Banking System that we recommend you consider before investing in the business.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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