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Why Cathay General (CATY) is a Great Dividend Stock Right Now

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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.

Cathay General in Focus

Cathay General (CATY - Free Report) is headquartered in Los Angeles, and is in the Finance sector. The stock has seen a price change of -4.93% since the start of the year. Currently paying a dividend of $0.34 per share, the company has a dividend yield of 3.33%. In comparison, the Banks - West industry's yield is 2.69%, while the S&P 500's yield is 1.61%.

In terms of dividend growth, the company's current annualized dividend of $1.36 is up 7.1% from last year. Cathay General has increased its dividend 3 times on a year-over-year basis over the last 5 years for an average annual increase of 9.32%. 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. Cathay's current payout ratio is 35%. This means it paid out 35% of its trailing 12-month EPS as dividend.

CATY is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $4.41 per share, which represents a year-over-year growth rate of 16.05%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers 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. With that in mind, CATY is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).


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