Are You Looking for a High-Growth Dividend Stock? Cathay General (CATY) Could Be a Great Choice
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Cathay General in Focus
Cathay General (CATY) is headquartered in Los Angeles, and is in the Finance sector. The stock has seen a price change of 3.72% since the start of the year. The holding company for Cathay Bank is currently shelling out a dividend of $0.34 per share, with a dividend yield of 3.05%. This compares to the Banks - West industry's yield of 2.09% and the S&P 500's yield of 1.37%.
Looking at dividend growth, the company's current annualized dividend of $1.36 is up 7.1% from last year. Over the last 5 years, Cathay General has increased its dividend 3 times on a year-over-year basis for an average annual increase of 10.05%. 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. Cathay's current payout ratio is 36%, meaning it paid out 36% of its trailing 12-month EPS as dividend.
CATY is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $3.84 per share, which represents a year-over-year growth rate of 1.05%.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, CATY presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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