Why Columbia Banking (COLB) is a Top Dividend Stock for Your Portfolio
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Columbia Banking in Focus
Headquartered in Tacoma, Columbia Banking (COLB) is a Finance stock that has seen a price change of -32.03% so far this year. The bank holding company is currently shelling out a dividend of $0.36 per share, with a dividend yield of 7.03%. This compares to the Banks - West industry's yield of 3.41% and the S&P 500's yield of 1.7%.
In terms of dividend growth, the company's current annualized dividend of $1.44 is up 20% from last year. Columbia Banking has increased its dividend 2 times on a year-over-year basis over the last 5 years for an average annual increase of 2.92%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Columbia Banking's current payout ratio is 39%, meaning it paid out 39% of its trailing 12-month EPS as dividend.
COLB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $3.45 per share, representing a year-over-year earnings growth rate of 1.77%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, COLB is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Columbia Banking System, Inc. (COLB) : Free Stock Analysis Report
