Cathay General Bancorp's (NASDAQ:CATY) Dividend Will Be $0.34

Cathay General Bancorp's (NASDAQ:CATY) investors are due to receive a payment of $0.34 per share on 10th of June. This means that the annual payment will be 3.6% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Cathay General Bancorp

Cathay General Bancorp's Payment Expected To Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time.

Having distributed dividends for at least 10 years, Cathay General Bancorp has a long history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, Cathay General Bancorp's payout ratio sits at 22%, an extremely comfortable number that shows that it can pay its dividend.

EPS is set to fall by 4.6% over the next 12 months. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 36%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

Cathay General Bancorp Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.04 in 2014 to the most recent total annual payment of $1.36. This means that it has been growing its distributions at 42% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Cathay General Bancorp has seen EPS rising for the last five years, at 5.9% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Cathay General Bancorp's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Cathay General Bancorp that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.