Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Columbia Banking System, Inc. (NASDAQ:COLB) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 9th of November, you won't be eligible to receive this dividend, when it is paid on the 25th of November.
Columbia Banking System's next dividend payment will be US$0.28 per share, on the back of last year when the company paid a total of US$1.48 to shareholders. Based on the last year's worth of payments, Columbia Banking System stock has a trailing yield of around 4.8% on the current share price of $30.67. If you buy this business for its dividend, you should have an idea of whether Columbia Banking System's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Columbia Banking System paid out more than half (57%) of its earnings last year, which is a regular payout ratio for most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Columbia Banking System earnings per share are up 5.3% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Columbia Banking System has delivered 43% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Has Columbia Banking System got what it takes to maintain its dividend payments? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. We're unconvinced on the company's merits, and think there might be better opportunities out there.
If you're not too concerned about Columbia Banking System's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Case in point: We've spotted 2 warning signs for Columbia Banking System you should be aware of.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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