East West Bancorp, Inc. (NASDAQ:EWBC) Passed Our Checks, And It's About To Pay A US$0.48 Dividend
It looks like East West Bancorp, Inc. (NASDAQ:EWBC) is about to go 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase East West Bancorp's shares before the 3rd of February in order to receive the dividend, which the company will pay on the 21st of February.
The company's next dividend payment will be US$0.48 per share, on the back of last year when the company paid a total of US$1.92 to shareholders. Based on the last year's worth of payments, East West Bancorp has a trailing yield of 2.5% on the current stock price of $75.94. If you buy this business for its dividend, you should have an idea of whether East West Bancorp's dividend is reliable and sustainable. So we need to investigate whether East West Bancorp can afford its dividend, and if the dividend could grow.
See our latest analysis for East West Bancorp
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. East West Bancorp paid out just 20% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see East West Bancorp's earnings per share have risen 18% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, East West Bancorp has lifted its dividend by approximately 17% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
Has East West Bancorp got what it takes to maintain its dividend payments? Companies like East West 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 East West Bancorp more closely.
So while East West Bancorp looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 1 warning sign for East West Bancorp that you should be aware of before investing in their shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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.
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