Friday, April 10, 2015

Small Cap Bank CHCO a 2015 Dividend Machine

CHCO, City Holding Company, is a bank holding company.  The bank does business in West Virginia as City National Bank of West Virginia.  CHCO meets all criteria for inclusion in the 2015 Dividend Machine model portfolio.

Small banks have done well lately although many experts think they have a more difficult time than the larger banks due to regulation.   CHCO provides commercial banking, consumer banking, mortgage lending, and wealth management through its 82 offices.  

Let’s look at CHCO’s Dividend Machine Fundamentals to see if it is worthy of consideration.  To be a Dividend Machine we need more EPS than dividends paid out.   CHCO’s last four quarters of earnings came in at $3.37.   Dividends paid out during that period were $1.60.  They just raised the dividend from $.40 to $.42; a five percent increase.    CHCO goes ex dividend on April 13.    Their five year average dividend increase is 4.7%.   This dividend growth rate is within our Dividend Machine criteria of 4%.    CHCO’s debt to equity (D/E) ratio is .04 which is well below our maximum threshold of 1 or less or equal to industry standard.

The table below presents CHCO’s Dividend Machine fundamentals

Followers of this blog know that I do not provide investment advice.   My purpose of writing about a particular stock is to determine if that stock meets the criteria I set out at the beginning of the year to be a Dividend Machine.   Stocks that meet these criteria become part of that year’s model portfolio.

I do not sell or buy or reinvest in these portfolios.   I develop them to be able to track how this very strict and disciplined strategy performs.  

In your personal investing you may use different or more criteria to decide which stocks to buy for income.    Some will use sector diversification to determine if a given stock is a good fit.   I appreciate that approach.   Others will use free cash flow instead of EPS to determine if, indeed, a stock is a good fit.

My Dividend Machine strategy is a simple way for ordinary investors to screen for dividend stocks.   At the beginning of each year, I set the Dividend Machine criteria based on what I think I need for income, for future income increases, and for safety.   It is interesting that the year I profiled 52 stocks (2011) using these four Dividend Machine criteria, the portfolio ended up being well diversified by industry and market cap.   Plus, it has done very well over the past 4 years.      

Today, I am adding CHCO to the 2015 Dividend Machine portfolio and perhaps you will consider this regional bank for the income producing portion of your portfolio.


Disclosure; No position but may add.