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.
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.
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.
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:
- 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 strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.
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