Stock Analysis

City Holding's (NASDAQ:CHCO) Upcoming Dividend Will Be Larger Than Last Year's

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NasdaqGS:CHCO
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City Holding Company (NASDAQ:CHCO) has announced that it will be increasing its dividend from last year's comparable payment on the 31st of October to $0.65. Even though the dividend went up, the yield is still quite low at only 2.7%.

Check out our latest analysis for City Holding

City Holding's Payment Expected To Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

City Holding has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 40%, which means that City Holding would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 20.3%. Analysts estimate the future payout ratio will be 36% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

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NasdaqGS:CHCO Historic Dividend October 2nd 2022

City Holding Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $1.40 in 2012 to the most recent total annual payment of $2.40. This means that it has been growing its distributions at 5.5% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

City Holding Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that City Holding has been growing its earnings per share at 9.4% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

City Holding Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that City Holding is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 5 City Holding analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

What are the risks and opportunities for City Holding?

City Holding Company operates as a holding company for City National Bank of West Virginia that provides various banking, trust and investment management, and other financial solutions in the United States.

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Rewards

  • Trading at 35.6% below our estimate of its fair value

  • Earnings are forecast to grow 3.82% per year

  • Earnings grew by 15.9% over the past year

Risks

  • Significant insider selling over the past 3 months

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