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Why Income Investors Should Have Umpqua Holdings Corporation (NASDAQ:UMPQ) In Their Portfolio

Simply Wall St

Over the past 10 years Umpqua Holdings Corporation (NASDAQ:UMPQ) has grown its dividend payouts from $0.20 to $0.84. With a market cap of US$3.5b, Umpqua Holdings pays out 52% of its earnings, leading to a 5.2% yield. Let me elaborate on you why the stock stands out for income investors like myself.

See our latest analysis for Umpqua Holdings

What Is A Dividend Rock Star?

It is a stock that pays a stable and consistent dividend, having done so reliably for the past decade with the expectation of this continuing into the future. More specifically:

  • Its annual yield is among the top 25% of dividend payers
  • It has paid dividend every year without dramatically reducing payout in the past
  • Its has increased its dividend per share amount over the past
  • It can afford to pay the current rate of dividends from its earnings
  • It is able to continue to payout at the current rate in the future

High Yield And Dependable

Umpqua Holdings's yield sits at 5.2%, which is high for Banks stocks. But the real reason Umpqua Holdings stands out is because it has a proven track record of continuously paying out this level of dividends, from earnings, to shareholders and can be expected to continue paying in the future. This is a highly desirable trait for a stock holding if you're investor who wants a robust cash inflow from your portfolio over a long period of time.

NasdaqGS:UMPQ Historical Dividend Yield, September 10th 2019

If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. UMPQ has increased its DPS from $0.20 to $0.84 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.

The company currently pays out 52% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect UMPQ's payout to remain around the same level at 57% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 5.5%. Moreover, EPS is forecasted to fall to $1.59 in the upcoming year.

When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

Next Steps:

Umpqua Holdings ticks all the boxes for what I look for in a dividend stock. If you are looking to build an income focused portfolio, this could be one to include. However, given 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. There are three fundamental factors you should look at:

  1. 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.
  2. 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.
  3. Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.