PacWest Bancorp (NASDAQ:PACW) Is An Attractive Dividend Stock, Here’s Why
Over the past 10 years PacWest Bancorp (NASDAQ:PACW) has been paying dividends to shareholders. The company currently pays out a dividend yield of 6.0% to shareholders, making it a relatively attractive dividend stock. Should it have a place in your portfolio? Let’s take a look at PacWest Bancorp in more detail.
See our latest analysis for PacWest Bancorp
5 checks you should use to assess a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is its annual yield among the top 25% of dividend-paying companies?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has it increased its dividend per share amount over the past?
Does earnings amply cover its dividend payments?
Will the company be able to keep paying dividend based on the future earnings growth?
How does PacWest Bancorp fare?
PacWest Bancorp has a trailing twelve-month payout ratio of 64%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 59%, leading to a dividend yield of around 5.9%. Furthermore, EPS should increase to $3.75.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
Compared to its peers, PacWest Bancorp produces a yield of 6.0%, which is high for Banks stocks.
Next Steps:
Keeping in mind the dividend characteristics above, PacWest Bancorp is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three relevant aspects you should further research:
Future Outlook: What are well-informed industry analysts predicting for PACW’s future growth? Take a look at our free research report of analyst consensus for PACW’s outlook.
Valuation: What is PACW worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether PACW is currently mispriced by the market.
Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
