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Why Columbia Banking (COLB) is a Great Dividend Stock Right Now

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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.

Cash flow can come from bond interest, interest from other types of investments, and of course, 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

Headquartered in Tacoma, Columbia Banking (COLB - Free Report) is a Finance stock that has seen a price change of -8.66% so far this year. The bank holding company is paying out a dividend of $0.36 per share at the moment, with a dividend yield of 5.91% compared to the Banks - West industry's yield of 2.94% and the S&P 500's yield of 1.59%.

In terms of dividend growth, the company's current annualized dividend of $1.44 is up 4.3% from last year. In the past five-year period, Columbia Banking has increased its dividend 2 times on a year-over-year basis for an average annual increase of 6.36%. Future dividend growth will depend on earnings growth as well as 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 56%. This means it paid out 56% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, COLB expects solid earnings growth. The Zacks Consensus Estimate for 2024 is $2.55 per share, representing a year-over-year earnings growth rate of 0.39%.

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 must be conscious 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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