Columbia Banking System, Inc. (NASDAQ:COLB) will pay a dividend of $0.36 on the 15th of September. This means the annual payment is 5.6% of the current stock price, which is above the average for the industry.

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Columbia Banking System's Earnings Will Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Having distributed dividends for at least 10 years, Columbia Banking System has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 28%, which means that Columbia Banking System would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 33.6%. Analysts forecast the future payout ratio could be 45% over the same time horizon, which is a number we think the company can maintain.

Check out our latest analysis for Columbia Banking System

Columbia Banking System Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $1.01 in 2015, and the most recent fiscal year payment was $1.44. This implies that the company grew its distributions at a yearly rate of about 3.6% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Columbia Banking System has seen EPS rising for the last five years, at 47% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Columbia Banking System's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 8 analysts we track are forecasting for Columbia Banking System for free with public analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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