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Are You Looking for a High-Growth Dividend Stock?

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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Columbia Banking in Focus

Columbia Banking (COLB - Free Report) is headquartered in Tacoma, and is in the Finance sector. The stock has seen a price change of -4.09% since the start of the year. The bank holding company is currently shelling out a dividend of $0.36 per share, with a dividend yield of 5.63%. This compares to the Banks - West industry's yield of 2.77% and the S&P 500's yield of 1.61%.

In terms of dividend growth, the company's current annualized dividend of $1.44 is up 4.3% from last year. Columbia Banking has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 4.97%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Columbia Banking's current payout ratio is 48%, meaning it paid out 48% of its trailing 12-month EPS as dividend.

COLB is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $3.09 per share, with earnings expected to increase 21.65% from the year ago period.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. It's important to keep in mind that not all companies provide a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, COLB is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).


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