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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.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a 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.
East West Bancorp in Focus
Based in Pasadena, East West Bancorp (EWBC) is in the Finance sector, and so far this year, shares have seen a price change of 2.58%. The bank holding company is currently shelling out a dividend of $0.6 per share, with a dividend yield of 2.44%. This compares to the Banks - West industry's yield of 2.87% and the S&P 500's yield of 1.52%.
In terms of dividend growth, the company's current annualized dividend of $2.40 is up 9.1% from last year. In the past five-year period, East West Bancorp has increased its dividend 4 times on a year-over-year basis for an average annual increase of 18.47%. 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. East West Bancorp's current payout ratio is 26%. This means it paid out 26% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for EWBC for this fiscal year. The Zacks Consensus Estimate for 2025 is $8.85 per share, representing a year-over-year earnings growth rate of 6.63%.
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. However, not all companies offer 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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).