Yahoo Finance Why East West Bancorp (EWBC) is a Great Dividend Stock Right Now
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
East West Bancorp in Focus
East West Bancorp (EWBC) is headquartered in Pasadena, and is in the Finance sector. The stock has seen a price change of -19.01% since the start of the year. The bank holding company is currently shelling out a dividend of $0.48 per share, with a dividend yield of 3.6%. This compares to the Banks - West industry's yield of 3.45% and the S&P 500's yield of 1.72%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.92 is up 20% from last year. Over the last 5 years, East West Bancorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 16.24%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. East West Bancorp's current payout ratio is 20%. This means it paid out 20% of its trailing 12-month EPS as dividend.
EWBC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2023 is $8.85 per share, representing a year-over-year earnings growth rate of 11.74%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, EWBC is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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East West Bancorp, Inc. (EWBC) : Free Stock Analysis Report
