Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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 -2.14% since the start of the year. Currently paying a dividend of $0.8 per share, the company has a dividend yield of 2.08%. In comparison, the Banks - West industry's yield is 2.64%, while the S&P 500's yield is 1.45%.
Taking a look at the company's dividend growth, its 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 4 times on a year-over-year basis for an average annual increase of 14.48%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. East West Bancorp's current payout ratio is 25%. This means it paid out 25% 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 $7.01 per share, representing a year-over-year earnings growth rate of 14.92%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer 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. 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 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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East West Bancorp, Inc. (EWBC) : Free Stock Analysis Report
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