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East West Bancorp (EWBC) Could Be a Great Choice

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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.

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 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 - Free Report) is headquartered in Pasadena, and is in the Finance sector. The stock has seen a price change of -7.14% since the start of the year. The bank holding company is currently shelling out a dividend of $0.4 per share, with a dividend yield of 2.19%. This compares to the Banks - West industry's yield of 2.62% and the S&P 500's yield of 1.65%.

In terms of dividend growth, the company's 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%. 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%. This means 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.

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. 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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