Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. In the past 10 years Bank of Commerce Holdings (NASDAQ:BOCH) has returned an average of 3.00% per year to investors in the form of dividend payouts. Let’s dig deeper into whether Bank of Commerce Holdings should have a place in your portfolio.
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share amount increased over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How well does Bank of Commerce Holdings fit our criteria?
The current trailing twelve-month payout ratio for the stock is 21.64%, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Dividend payments from Bank of Commerce Holdings have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Relative to peers, Bank of Commerce Holdings has a yield of 1.25%, which is on the low-side for Banks stocks.
After digging a little deeper into Bank of Commerce Holdings’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. 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 essential factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for BOCH’s future growth? Take a look at our free research report of analyst consensus for BOCH’s outlook.
- Valuation: What is BOCH 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 BOCH is currently mispriced by the market.
- 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.