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If you are interested in cashing in on City Holding Company’s (NASDAQ:CHCO) upcoming dividend of US$0.53 per share, you only have 4 days left to buy the shares before its ex-dividend date, 12 October 2018, in time for dividends payable on the 31 October 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine City Holding’s latest financial data to analyse its dividend characteristics.

View our latest analysis for City Holding

How I analyze a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

• Is its annual yield among the top 25% of dividend-paying companies?

• Has it paid dividend every year without dramatically reducing payout in the past?

• Has the amount of dividend per share grown over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Will it have the ability to keep paying its dividends going forward?

How does City Holding fare?

City Holding has a trailing twelve-month payout ratio of 46%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 38%, leading to a dividend yield of around 2.5%. However, EPS should increase to $4.83, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of CHCO it has increased its DPS from $1.36 to $2.12 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes CHCO a true dividend rockstar.

Relative to peers, City Holding generates a yield of 2.8%, which is high for Banks stocks but still below the market’s top dividend payers.

Next Steps:

With this in mind, I definitely rank City Holding as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three essential factors you should further research: