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High Dividend 50: Columbia Banking System

Published on July 5th, 2024 by Nathan Parsh

High-yield stocks pay out dividends that are significantly more than market average dividends. For example, the S&P 500’s current yield is only ~1.3% today.

High-yield stocks can be very helpful to shore up income after retirement. For example, a $120,000 investment in stocks with an average dividend yield of 5% creates an average of $500 a month in dividends.

We have created a spreadsheet of stocks (and closely related REITs and MLPs, etc.) with dividend yields of 5% or more.

You can download your free full list of all high dividend stocks with 5%+ yields (along with important financial metrics such as dividend yield and payout ratio) by clicking on the link below:


The next stock in our ‘High Dividend 50’ series, where we cover the 50 highest yielding stocks in the Sure Analysis Research Database, to review is Columbia Banking System (COLB).

Shares of Columbia Banking System have fallen nearly 26% year-to-date, which has driven the yield above 7%. This article will review Columbia Banking System’s potential as an income investment.

Business Overview

Columbia Banking System functions as the bank holding company for Umpqua Bank. The company’s primary areas of operation include, California, Washington state, Oregon, and Idaho.

Source: Investor Relations

Columbia Banking System offers a wide variety of commercial and retail banking services, including deposit products and comprehensive loan options for individuals, businesses, and the agricultural sector.

Additionally, the company provides extensive financial services, serving various clientele throughout its area of operations. The stock has a current market capitalization of $4.2 billion.

On April 25th, 2024, Columbia Banking System reported first quarter earnings results that were mixed. For the period, revenue grew 10.3% to $473.7 million, though this was slightly less than analysts had expected. Adjusted earnings-per-share of $0.65 compared favorably with $0.46 in the prior year and was $0.12 ahead of estimates.

The company’s total assets of $52.2 billion was stable sequentially while total loans inched up 0.5% to $37.6 billion. Total deposits were slightly higher at $41.7 billion.

Net charge-offs were 0.47% of average loans and leases compared to 0.31% in the prior quarter while provisions for credit losses of $17.1 million compared to $54.9 million. Non-performing assets accounted for just 0.28% of total assets, which was up slightly from 0.22% as of December 31st, 2023.

Net interest income grew 13% to $423.4 million year-over-year, but was lower by 6.7% from the fourth quarter of 2023. As a result, net interest margin contracted 26 basis points to 3.52%.

Columbia Banking System is expected to earn $2.44 per share this year, which would be a 37.1% increase from the 2023.

Growth Prospects

It might be a community bank, but Columbia Banking System has several levers for growth that it can use to expand its business.

First, the company completed its merger with Umpqua Holdings Corporation on March 1st, 2023. The result was that the new entity is now a top-30 U.S. bank that has a sizeable foot print in western U.S. states.

Source: Investor Relations

In the northwest area of the country, Columbia Banking System trails just some of the largest financial institutions in the world, such as Bank of America (BAC) and JPMorgan Chase (JPM), in terms of market share. This places the company ahead of many other smaller banks in the region.

Columbia Banking System also has a presence in some of the largest cities in its regions, including Los Angeles, Seattle, and Phoenix, giving it a wide pool of potential customers.

The company also benefits from higher projected population growth in its footprint as well as higher household income compared to the national average.

Earnings growth has been less than 4% annually over the last decade, but we believe that the company could see 7% annual growth through 2024.

Competitive Advantages

Columbia Banking System is relatively small even after merging with Umpqua, so we don’t believe that the company holds significant competitive advantages compared to the larger names in the sector.

However, that does not mean that Columbia Banking System isn’t without the ability to grow its business.
While the company already has a large footprint in its main areas of operation, there is room for further expansion as well.

Source: Investor Relations

Columbia Banking System controls just a fraction of the available market share in top markets. The key part here is that the company has not over-saturated its footprint as its market share is just 8.5% in Portland, 5.2% in Seattle, and 0.1% in Los Angeles. These markets are very large and the company has room for further expansion.

Columbia Banking System has barely expanded in other regions as well, such as Arizona and Colorado. Phoenix and Denver are two areas where the company could meaningfully take market share. These two are among the company largest areas of operation based on both population and total market share.

Dividend Analysis

Shares of Columbia Banking System yield 7.3%, which is almost six times the average yield of the S&P 500 Index. The stock’s typical yield range over the last 10 years has been in the 3% to 4% range, so the current yield is well above average.

The yield has become generous in part because the share price has declined so much in 2024, but also because the company has aggressively raised its payments over the last decade. Even with a pause in 2020, Columbia Banking System’s dividend has a compound annual growth rate of 11% for the 2013 to 2023 period.

Columbia Banking System’s dividend has a growth streak of four years, but the payment has now been the same for five consecutive quarters. The company has also issued several special dividends over the last decade, but last did so in 2019.

The company should distribute at least $1.44 of dividends per share this year. Using earnings estimates for 2024, the projected payout ratio is 59%. This is slightly below the long-term average payout ratio of 61%.

High-yields can foretell of declining fundamentals within a company, but we believe that Columbia Banking System’s dividend is safe given the reasonable payout ratio.

Final Thoughts

Columbia Banking System has endured a difficult year, with the stock price cratering. That has resulted in an above average dividend yield that appears to be well covered by earnings.

The dividend should be supported by a business that is expanding its footprint to further capture additional market share.

The company’s most recent quarter was mixed, but both revenue and earnings-per-share grew considerably year-over-year.

Given the high yield that we believe is safe and the potential for business growth, we believe that Columbia Banking System could be a good investment opportunity for income investors.

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