Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Cathay General Bancorp (NASDAQ:CATY) is about to go ex-dividend in just 3 days. If you purchase the stock on or after the 26th of February, you won't be eligible to receive this dividend, when it is paid on the 11th of March.
Cathay General Bancorp's next dividend payment will be US$0.31 per share, on the back of last year when the company paid a total of US$1.24 to shareholders. Based on the last year's worth of payments, Cathay General Bancorp stock has a trailing yield of around 3.2% on the current share price of $38.6. If you buy this business for its dividend, you should have an idea of whether Cathay General Bancorp's dividend is reliable and sustainable. As a result, readers should always check whether Cathay General Bancorp has been able to grow its dividends, or if the dividend might be cut.
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. That's why it's good to see Cathay General Bancorp paying out a modest 43% of its earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Cathay General Bancorp, with earnings per share up 7.5% on average over the last 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, 10 years ago, Cathay General Bancorp has lifted its dividend by approximately 41% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Should investors buy Cathay General Bancorp for the upcoming dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating Cathay General Bancorp more closely.
On that note, you'll want to research what risks Cathay General Bancorp is facing. Our analysis shows 2 warning signs for Cathay General Bancorp and you should be aware of these before buying any shares.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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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. 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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