Yahoo Finance Cathay General Bancorp (NASDAQ:CATY) Could Be A Buy For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Cathay General Bancorp (NASDAQ:CATY) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Cathay General Bancorp's shares on or after the 26th of May will not receive the dividend, which will be paid on the 6th of June.
The company's next dividend payment will be US$0.34 per share. Last year, in total, the company distributed US$1.36 to shareholders. Last year's total dividend payments show that Cathay General Bancorp has a trailing yield of 3.5% on the current share price of $38.45. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Cathay General Bancorp can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Cathay General Bancorp
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Cathay General Bancorp's payout ratio is modest, at just 25% of profit.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Cathay General Bancorp's earnings per share have risen 13% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Cathay General Bancorp has delivered 42% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Final Takeaway
Is Cathay General Bancorp worth buying for its dividend? Companies like Cathay General Bancorp that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating Cathay General Bancorp more closely.
While it's tempting to invest in Cathay General Bancorp for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for Cathay General Bancorp you should be aware of.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
