Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. In the past 10 years Umpqua Holdings Corporation (NASDAQ:UMPQ) has returned an average of 3.00% per year to investors in the form of dividend payouts. Let’s dig deeper into whether Umpqua Holdings should have a place in your portfolio. See our latest analysis for Umpqua Holdings
5 questions to ask before buying a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it paying an annual yield above 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share risen in the past couple of years?
- Is its earnings sufficient to payout dividend at the current rate?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Umpqua Holdings fare?
Umpqua Holdings has a trailing twelve-month payout ratio of 60.65%, which means that the dividend is covered by earnings. However, going forward, analysts expect UMPQ’s payout to fall to 47.74% of its earnings, which leads to a dividend yield of around 3.81%. However, EPS should increase to $1.35, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Not only have dividend payouts from Umpqua Holdings fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves. In terms of its peers, Umpqua Holdings produces a yield of 3.28%, which is on the low-side for Banks stocks.
Taking into account the dividend metrics, Umpqua Holdings ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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. I’ve put together three important factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for UMPQ’s future growth? Take a look at our free research report of analyst consensus for UMPQ’s outlook.
- Valuation: What is UMPQ 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 UMPQ 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 pass 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.