Community West Bancshares (NASDAQ:CWBC) Is Increasing Its Dividend To $0.08

The board of Community West Bancshares (NASDAQ:CWBC) has announced that it will be paying its dividend of $0.08 on the 31st of May, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 2.6% is only a modest boost to shareholder returns.

See our latest analysis for Community West Bancshares

Community West Bancshares' Dividend Forecasted To Be Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Community West Bancshares has a good history of paying out dividends, with its current track record at 8 years. While past records don't necessarily translate into future results, the company's payout ratio of 17% also shows that Community West Bancshares is able to comfortably pay dividends.

Looking forward, earnings per share is forecast to fall by 6.3% over the next year. But if the dividend continues along recent trends, we estimate the future payout ratio could be 27%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.

Community West Bancshares Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. Since 2015, the dividend has gone from $0.08 total annually to $0.32. This means that it has been growing its distributions at 19% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Community West Bancshares has seen EPS rising for the last five years, at 16% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Community West Bancshares Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Community West Bancshares has 2 warning signs (and 1 which is potentially serious) we think you should know about. 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.