Why City Holding (CHCO) is a Great Dividend Stock Right Now
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.
Based in Charleston, City Holding (CHCO) is in the Finance sector, and so far this year, shares have seen a price change of 0.67%. The bank holding company for City National Bank of West Virginia is currently shelling out a dividend of $0.79 per share, with a dividend yield of 2.65%. This compares to the Banks - Southeast industry's yield of 2.4% and the S&P 500's yield of 1.56%.
Looking at dividend growth, the company's current annualized dividend of $3.16 is up 7.7% from last year. City Holding has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 7.35%. 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. Right now, City Holding's payout ratio is 40%, which means it paid out 40% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, CHCO expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $8.02 per share, representing a year-over-year earnings growth rate of 1.65%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers 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, CHCO presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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This article originally published on Zacks Investment Research (zacks.com).
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