Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, 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 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
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 -5.11% since the start of the year. The bank holding company is paying out a dividend of $0.4 per share at the moment, with a dividend yield of 2.14% compared to the Banks - West industry's yield of 2.58% and the S&P 500's yield of 1.6%.
In terms of dividend growth, the company's current annualized dividend of $1.60 is up 21.2% from last year. In the past five-year period, East West Bancorp has increased its dividend 3 times on a year-over-year basis for an average annual increase of 15.34%. 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. East West Bancorp's current payout ratio is 24%, meaning it paid out 24% of its trailing 12-month EPS as dividend.
EWBC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $7.79 per share, with earnings expected to increase 27.70% from the year ago period.
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 have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, EWBC presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #1 (Strong Buy).
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East West Bancorp, Inc. (EWBC) : Free Stock Analysis Report
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