Why East West Bancorp (EWBC) is a Top Dividend Stock for Your Portfolio
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But 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 account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
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 -14.07% since the start of the year. Currently paying a dividend of $0.4 per share, the company has a dividend yield of 2.37%. In comparison, the Banks - West industry's yield is 2.62%, while the S&P 500's yield is 1.85%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.60 is up 21.2% from last year. Over the last 5 years, East West Bancorp has increased its dividend 3 times on a year-over-year basis for an average annual increase of 15.34%. Future dividend growth will depend on earnings growth as well as 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 $7.84 per share, which represents a year-over-year growth rate of 28.52%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that EWBC is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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