City Holding Company (NASDAQ:CHCO) has pleased shareholders over the past 10 years, by paying out dividends. The company currently pays out a dividend yield of 3.1% to shareholders, making it a relatively attractive dividend stock. Does City Holding tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it the top 25% annual dividend yield payer?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share risen in the past couple of years?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
How well does City Holding fit our criteria?
City Holding has a trailing twelve-month payout ratio of 43%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 42% which, assuming the share price stays the same, leads to a dividend yield of 3.1%. Moreover, EPS should increase to $4.83.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. CHCO has increased its DPS from $1.36 to $2.12 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.
In terms of its peers, City Holding generates a yield of 3.1%, which is high for Banks stocks but still below the market’s top dividend payers.
Taking into account the dividend metrics, City Holding 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, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three key factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for CHCO’s future growth? Take a look at our free research report of analyst consensus for CHCO’s outlook.
- Valuation: What is CHCO 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 CHCO 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 past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.