Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see PacWest Bancorp (NASDAQ:PACW) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 19th of February will not receive this dividend, which will be paid on the 28th of February.
PacWest Bancorp’s next dividend payment will be US$0.60 per share. Last year, in total, the company distributed US$2.40 to shareholders. Based on the last year’s worth of payments, PacWest Bancorp has a trailing yield of 6.5% on the current stock price of $36.99. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. PacWest Bancorp paid out 62% of its earnings to investors last year, a normal payout level for most businesses.
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.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, PacWest Bancorp’s earnings per share have been growing at 15% a year for the past five years.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, ten years ago, PacWest Bancorp has lifted its dividend by approximately 51% 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.
Has PacWest Bancorp got what it takes to maintain its dividend payments? Earnings per share are growing at an attractive rate, and PacWest Bancorp is paying out a bit over half its profits. Overall, PacWest Bancorp looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Ever wonder what the future holds for PacWest Bancorp? See what the 12 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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