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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Columbia Banking System, Inc. (NASDAQ:COLB) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 9th of November will not receive the dividend, which will be paid on the 25th of November.
Columbia Banking System's upcoming dividend is US$0.28 a share, following on from the last 12 months, when the company distributed a total of US$1.48 per share to shareholders. Looking at the last 12 months of distributions, Columbia Banking System has a trailing yield of approximately 4.8% on its current stock price of $30.67. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. 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 (57%) 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Columbia Banking System earnings per share are up 5.3% per annum 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 last 10 years, Columbia Banking System has lifted its dividend by approximately 43% 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.
The Bottom Line
Is Columbia Banking System an attractive dividend stock, or better left on the shelf? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as 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.
So if you want to do more digging on Columbia Banking System, you'll find it worthwhile knowing the risks that this stock faces. To help with this, we've discovered 2 warning signs for Columbia Banking System that you should be aware of before investing in their shares.
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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