Amid the ongoing turmoil in the financial sector due to the regional banking crisis and expectations of economic slowdown/recession in the near term, solid dividend-yielding stocks are on long-term investors’ radars, seeking regular income. Today, we are discussing one such stock —
Columbia Banking System, Inc. ( COLB Quick Quote COLB - Free Report) .
Headquartered in Tacoma, WA, COLB is a western U.S. regional bank with more than $50 billion in assets. The bank has been increasing its quarterly
dividend on a regular basis, with the last hike of 20% to 36 cents per share last week.
Prior to the current hike, the company increased its dividend by 7.1% to 30 cents per share in September 2021.
Over the past five years, COLB increased its dividend five times, with an annualized dividend growth rate of 2.9%. Considering last day’s closing price of $20.49, the company’s dividend yield currently stands at 5.86%. This is impressive compared with the industry average of 3.56%.
Investors, who are interested in this Zacks Rank #3 (Hold) stock, should first take a look at its fundamentals mentioned below before making any investment decision.
COLB’s ability to sustain its attractive dividend yield depends on the earnings growth rate. Its earnings are projected to see growth rates of 5.3% and 13% in 2023 and 2024, respectively, depicting a robust earnings picture. Also, it has an impressive surprise history. Its earnings surpassed the Zacks Consensus Estimate in all of the trailing four quarters, the average beat being 6.55%.
COLB has been witnessing consistent organic growth. Net loans receivable witnessed a CAGR of 7.5% over the last four years (ended 2022). The upward trend continued in the first quarter of 2023.
COLB is expected to keep benefiting from higher rates. With the Federal Reserve anticipated to keep the rates higher in the near term to combat inflation, the company’s net interest margin (NIM) is likely to witness a decent expansion. The metric increased from 2.72% in 2020 to 4.08% in first-quarter 2023.
The company has a strong balance sheet, which indicates scope for growth of future dividends. As of Mar 31, 2023, Columbia Banking had total borrowings of $6 billion, and total cash and cash equivalents of $3.63 billion. Investment-grade long-term credit ratings of BBB-/BBB+ from S&P Global Ratings and Fitch Ratings, respectively, and a stable outlook render the company favorable access to the debt market.
Also, its negligible debt/equity ratio compares favorably with 113.33% of the industry average. Improving the financial health of the company will help it perform better in a dynamic business environment.
Hence, despite near-term headwinds like rising expenses, COLB stock is fundamentally solid. So far this year, shares of Columbia Banking have plunged 32% compared with the
industry’s fall of 39.3%.
Image Source: Zacks Investment Research
Therefore, income investors must watch this stock as it will help generate robust returns over time. You can see
. the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here Bank Stocks Worth a Look
A couple of bank stocks, such as
Associated Banc-Corp ( ASB Quick Quote ASB - Free Report) and Huntington Bancshares ( HBAN Quick Quote HBAN - Free Report) , are worth a look as these have robust dividend yields.
Considering the last day’s closing price, Associated Banc-Corp’s dividend yield currently stands at 5.53%. ASB carries a Zacks Rank of 3.
Based on the last day’s closing price, Huntington Bancshares’ dividend yield currently stands at 6.10%. HBAN carries a Zacks Rank of 3.