Yahoo Finance East West Bancorp, Inc. (NASDAQ:EWBC) Looks Interesting, And It's About To Pay A Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see East West Bancorp, Inc. (NASDAQ:EWBC) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, East West Bancorp investors that purchase the stock on or after the 31st of October will not receive the dividend, which will be paid on the 15th of November.
The company's next dividend payment will be US$0.40 per share, on the back of last year when the company paid a total of US$1.60 to shareholders. Last year's total dividend payments show that East West Bancorp has a trailing yield of 2.3% on the current share price of $69.86. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for East West Bancorp
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. East West Bancorp paid out just 21% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see East West Bancorp's earnings per share have risen 19% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. East West Bancorp has delivered an average of 15% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
From a dividend perspective, should investors buy or avoid East West Bancorp? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, East West Bancorp looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Wondering what the future holds for East West Bancorp? See what the nine analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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