All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. 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 the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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 (EWBC) is headquartered in Pasadena, and is in the Finance sector. The stock has seen a price change of 10.78% since the start of the year. Currently paying a dividend of $0.60 per share, the company has a dividend yield of 2.26%. In comparison, the Banks - West industry's yield is 2.75%, while the S&P 500's yield is 1.49%.
Looking at dividend growth, the company's current annualized dividend of $2.40 is up 9.1% from last year. Over the last 5 years, East West Bancorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 18.17%. 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 28%, meaning it paid out 28% of its trailing 12-month EPS as dividend.
EWBC is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $9.03 per share, with earnings expected to increase 8.80% from the year ago period.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer 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. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. 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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East West Bancorp, Inc. (EWBC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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