All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
Based in Pasadena, East West Bancorp (EWBC) is in the Finance sector, and so far this year, shares have seen a price change of 3.86%. Currently paying a dividend of $0.80 per share, the company has a dividend yield of 2.74%. In comparison, the Banks - West industry's yield is 2.95%, while the S&P 500's yield is 1.4%.
Looking at dividend growth, the company's current annualized dividend of $3.20 is up 33.3% 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 25%, meaning it paid out 25% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for EWBC for this fiscal year. The Zacks Consensus Estimate for 2026 is $10.25 per share, which represents a year-over-year growth rate of 8.01%.
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.
For instance, it's a rare occurrence when a tech start-up or big growth business offers its shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. 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 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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East West Bancorp, Inc. (EWBC): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).