Stock Analysis

Why You Might Be Interested In City Holding Company (NASDAQ:CHCO) For Its Upcoming Dividend

  •  Updated
NasdaqGS:CHCO
Source: Shutterstock

It looks like City Holding Company (NASDAQ:CHCO) is about to go ex-dividend in the next four days. Investors can purchase shares before the 14th of January in order to be eligible for this dividend, which will be paid on the 29th of January.

City Holding's next dividend payment will be US$0.58 per share. Last year, in total, the company distributed US$2.28 to shareholders. Calculating the last year's worth of payments shows that City Holding has a trailing yield of 3.2% on the current share price of $72.15. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether City Holding can afford its dividend, and if the dividend could grow.

View our latest analysis for City Holding

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see City Holding paying out a modest 41% of its earnings.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
NasdaqGS:CHCO Historic Dividend January 9th 2021

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, City Holding's earnings per share have been growing at 10% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, City Holding has increased its dividend at approximately 5.5% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

Is City Holding an attractive dividend stock, or better left on the shelf? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. City Holding ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

So while City Holding looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, City Holding has 2 warning signs (and 1 which can't be ignored) we think you should know about.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

If you decide to trade City Holding, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted


Valuation is complex, but we're helping make it simple.

Find out whether City Holding is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis