Columbia Banking (COLB) is a Top Dividend Stock Right Now: Should You Buy?
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Loading... - Michael Fischer
- 09 Jun 2023
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All investors have a strong desire to achieve significant returns on their investment portfolio, regardless of whether they invest in stocks, bonds, ETFs, or other securities. However, for income-oriented investors, the primary focus lies in generating a consistent cash flow from their liquid investments.
This cash flow can be derived from bond interest, interest earned from other investment types, and, of course, dividends. Dividends are highly sought-after distributions of a company's earnings that are paid out to shareholders. Investors often evaluate dividends based on their dividend yield, which measures the dividend as a percentage of the current stock price. Numerous academic studies have demonstrated that dividends constitute a substantial portion of long-term returns, frequently surpassing one-third of the total returns.
Shifting our attention to Columbia Banking, a finance sector company based in Tacoma, we find that its shares have experienced a price change of -21.31% so far this year. Presently, the bank holding company is distributing a dividend of $0.36 per share, resulting in a dividend yield of 6.07%. Comparatively, the Banks - West industry has a yield of 3.54%, while the S&P 500 has a yield of 1.72%.
Examining the company's dividend growth, we observe that its current annualized dividend stands at $1.44, marking a 20% increase from the previous year. Over the past five years, Columbia Banking has raised its dividend on two occasions, resulting in an average annual growth rate of 2.92%. The future growth of dividends will be dependent on both earnings growth and the payout ratio. The payout ratio represents the proportion of a company's annual earnings per share that is paid out as a dividend. At present, Columbia Banking has a payout ratio of 39%, indicating that it distributed 39% of its trailing 12-month EPS as a dividend.
Furthermore, COLB anticipates an expansion in earnings for the current fiscal year. According to the Zacks Consensus Estimate for 2023, the projected earnings per share are $3.57, representing a year-over-year growth rate of 5.31%.
To summarize, dividends are favored by investors for numerous reasons. They enhance stock investing profits, mitigate overall portfolio risk, and offer tax advantages, among other benefits. However, it's important to note that not every company provides a quarterly dividend. High-growth firms and tech start-ups, for instance, often refrain from distributing dividends to their shareholders. On the other hand, larger, more established companies with stable profits are generally considered the best options for dividends. Income investors should be cautious during periods of rising interest rates, as high-yielding stocks tend to face challenges. Considering these factors, COLB presents an appealing investment opportunity. Not only does it offer a solid dividend, but it also holds a Zacks Rank of 3 (Hold).
