City Holding (CHCO) is a Top Dividend Stock Right Now: Should You Buy?

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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.

City Holding (CHCO) is headquartered in Charleston, and is in the Finance sector. The stock has seen a price change of 22.76% since the start of the year. The bank holding company for City National Bank of West Virginia is paying out a dividend of $0.87 per share at the moment, with a dividend yield of 2.38% compared to the Banks - Southeast industry's yield of 1.86% and the S&P 500's yield of 1.3%.

Looking at dividend growth, the company's current annualized dividend of $3.48 is up 7.4% from last year. Over the last 5 years, City Holding has increased its dividend 5 times on a year-over-year basis for an average annual increase of 7.86%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. City Holding's current payout ratio is 38%, meaning it paid out 38% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for CHCO for this fiscal year. The Zacks Consensus Estimate for 2026 is $9.29 per share, which represents a year-over-year growth rate of 4.03%.

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.

For instance, it's a rare occurrence when a tech start-up or big growth business offers its shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that CHCO is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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This article originally published on Zacks Investment Research (zacks.com).

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