There's A Lot To Like About East West Bancorp's (NASDAQ:EWBC) Upcoming US$0.33 Dividend
East West Bancorp, Inc. (NASDAQ:EWBC) stock is about to trade ex-dividend in 4 days. This means that investors who purchase shares on or after the 8th of February will not receive the dividend, which will be paid on the 23rd of February.
East West Bancorp's next dividend payment will be US$0.33 per share. Last year, in total, the company distributed US$1.32 to shareholders. Looking at the last 12 months of distributions, East West Bancorp has a trailing yield of approximately 2.1% on its current stock price of $63.27. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether East West Bancorp can afford its dividend, and if the dividend could grow.
View our latest analysis for East West Bancorp
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately East West Bancorp's payout ratio is modest, at just 28% of profit.
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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see East West Bancorp earnings per share are up 8.3% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, East West Bancorp has lifted its dividend by approximately 42% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Should investors buy East West Bancorp for the upcoming dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. East West Bancorp ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
While it's tempting to invest in East West Bancorp for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 3 warning signs with East West Bancorp and understanding them should be part of your investment process.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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