Last update on 2024-06-27

City Holding (CHCO) - Dividend Analysis (Final Score: 6/8)

Analyze City Holding (CHCO) dividends with a comprehensive 8-criteria system, highlighting stability, performance, and investor appeal. Final Score: 6/8.

Short Analysis - Dividend Score: 6

We're running City Holding (CHCO) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

City Holding (CHCO) got a 6 out of 8 in a dividend analysis based on several criteria. Here’s the scoop: 1. Dividend Yield - CHCO's dividend yield is 2.417%, which is below the industry average of 2.76%. Although it has spiked in the past, it's generally been trending down. 2. Growth Rate - Their average dividend growth rate is around 13.65%, which is better than the 5% benchmark, but it's fluctuated a lot, with some years even seeing negative growth. 3. Payout Ratio - They've been prudent, keeping an average payout ratio of 44.81%, which suggests they’re good at reinvesting earnings. 4. Covered by Earnings - CHCO’s got enough earnings to cover its dividends, indicating a sustainable dividend policy. 5. Covered by Cash Flow - Their free cash flow has mostly covered their dividends except for a standout year in 2009. Recent years show lower coverage, so they might need to improve free cash flow. 6. Stability - CHCO’s dividends have grown steadily for the most part, meeting the stability criteria important for income investors. 7. Long-Term Payments - They’ve paid dividends for over 25 years, although they skipped in 2001. 8. Stock Repurchases - Reliable stock buybacks reflect confidence in financial strength.

Insights for Value Investors Seeking Stable Income

City Holding (CHCO) looks decent with a score of 6 out of 8, showing good dividend growth, a healthy payout ratio, and stability in long-term payments. However, their current dividend yield is less than the industry average and their cash flow coverage is lower than ideal lately. It’s worth considering for investment, but keep an eye on their dividend coverage and free cash flow trends to ensure they remain sustainable. It might not be the first pick for high yield, but it's pretty solid for steady dividend growth over time.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price.

City Holding (CHCO) has a current dividend yield of 2.417%, which is lower than the industry average of 2.76%. Over the past 20 years, CHCO's dividend yield has shown volatility, peaking at 4.2092% in 2009 during the financial crisis. However, it has generally trended downward and remains below the historical industry average. This lower yield could indicate that CHCO's stock price has increased significantly without a proportional increase in dividend payouts, or that its dividend growth has lagged behind market expectations. Investors might perceive this as less attractive compared to higher-yielding peers, potentially impacting CHCO's appeal to income-focused investors. The most recent trends suggest a decrease in yield from 3.2782% in 2020 to 2.417% in 2023, indicating either a rapid stock price increase or stagnant dividend growth, a signal investors need to scrutinize.

Average annual Growth Rate higher than 5% in the last 20 years?

Examining the 20-year dividend growth for City Holding (CHCO) is crucial to determine the company's potential for long-term income generation for investors. A consistent growth rate above 5% often indicates financial health, stability, and shareholder value creation.

Looking at City Holding's (CHCO) dividend growth over the past 20 years, we can observe considerable fluctuations. There were even years with negative growth, such as -12.7854 in 2018, which raises concerns. However, there were also periods of significant growth, for instance, a 150% increase in 2003 and an 8.7755% increase in 2023. Notably, the average dividend growth rate stands at approximately 13.65%, well above the 5% benchmark. This suggests that despite the variability, City Holding has generally succeeded in increasing its dividends, which is a positive sign for investor returns. Nevertheless, potential investors should remain cautious about the volatility in the dividend growth rate.

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio represents the percentage of earnings paid to shareholders in dividends. A ratio lower than 65% indicates a healthy ability to reinvest earnings.

City Holding (CHCO) demonstrates an average payout ratio of 44.81% over the last 20 years. This is notably lower than the 65% threshold, showing a prudent approach to dividend distribution while maintaining healthy reinvestment into the business. The ratio peaked significantly in 2008, at 76.49%, likely due to the financial crisis impacting earnings. However, CHCO's sustainable payout ratios in most other years indicate the company's strong earnings and financial health, making it a good dividend payer.

Dividends Well Covered by Earnings?

Explain the criterion for City Holding (CHCO) and why it is important to consider

This criterion ensures that City Holding (CHCO) is generating adequate earnings to cover its dividend payouts. If earnings significantly exceed dividends, it suggests a healthy and sustainable dividend policy. A well-covered dividend also indicates that the company can reinvest in its growth or maintain reserves for future uncertainties.

Dividends Well Covered by Cash Flow?

The 'Dividends Well Covered by Cash Flow' criterion is used to evaluate if a company's free cash flow is sufficient to cover its dividend payments. This metric is important as it indicates the sustainability of dividend payouts without the need for borrowing or depleting cash reserves.

Analyzing City Holding's free cash flow and dividend payout over the years from 2003 to 2023, we observe the ratios of free cash flow to dividends paid annually. A value over 1 indicates dividends are fully covered by cash flow: 1. Between 2003 and 2006, the coverage ranged from approximately 0.30 to 0.37, signaling a moderate to tight coverage. 2. In 2007 and 2008, the ratios spiked and then fell, with 2007 having a high ratio of approximately 0.57 before plummeting to 0.48 in 2008. 3. Notably, in 2009, the ratio jumped significantly to around 1.34, indicating exceptional coverage due to probably a one-time impact. 4. Post-2009, the coverage returns to more normalized levels ranging between 0.3 and 0.57, with recent years (2022 and 2023) indicating lower ratios of around 0.32 and 0.29, respectively. Overall, except for the extraordinary year in 2009, the coverage ratios generally signal moderate performance, with no recent trends suggesting risk to the dividend's sustainability but underscoring the necessity for improved free cash flows in the future to back persistent dividend growth.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

Based on the provided data of City Holding (CHCO)'s dividends per share over the past 20 years, it's apparent that the trend largely shows consistent increases in dividends from 2003 to 2023, rising from $0.75 to $2.665. However, there was a noticeable drop in 2018 where the dividend fell from $2.19 in 2017 to $1.91, which is not a drop exceeding 20%. Overall, this indicates a positive trend in dividend stability, showing resilience and steady growth aside from minor fluctuations. Such stability is crucial for income-seeking investors as it assures a reliable and steady income stream, which is often the primary goal of dividend investing.

Dividends Paid for Over 25 Years?

Determining if dividends have been paid over a span of 25 years helps in assessing the reliability and commitment of the company towards its shareholders. It reveals the company's financial stability and consistent profitability over a long period.

Based on the data provided, City Holding (CHCO) has paid dividends in all the years listed in the 25-year period except for the year 2001, where the dividend per share is recorded as 0. This suggests a generally stable trend with only one interruption. Despite a slight dip in 2018, the overall trend shows an increase in dividends paid, indicating a favorable long-term financial health and a shareholder-friendly approach.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for City Holding (CHCO) and why it is important to consider

The analysis of reliable stock repurchases over the past 20 years for City Holding is essential because it reflects the company's management decisions regarding share buybacks. Stable and consistent buybacks can indicate confidence in the company’s financial health and a focus on returning capital to shareholders. It also potentially enhances earnings per share (EPS) by reducing the number of shares outstanding.