East West Bancorp (NASDAQ:EWBC) Will Pay A Larger Dividend Than Last Year At $0.48

East West Bancorp, Inc. (NASDAQ:EWBC) will increase its dividend from last year's comparable payment on the 15th of May to $0.48. This takes the annual payment to 3.5% of the current stock price, which is about average for the industry.

View our latest analysis for East West Bancorp

East West Bancorp's Dividend Forecasted To Be Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Having distributed dividends for at least 10 years, East West Bancorp has a long history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, East West Bancorp's payout ratio sits at 20%, an extremely comfortable number that shows that it can pay its dividend.

EPS is set to fall by 1.5% over the next 3 years. Despite that, analysts estimate the future payout ratio could be 26% over the same time period, which is in a pretty comfortable range.

East West Bancorp Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.40 in 2013, and the most recent fiscal year payment was $1.92. This means that it has been growing its distributions at 17% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. East West Bancorp has impressed us by growing EPS at 19% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like East West Bancorp's Dividend

Overall, a dividend increase is always good, and we think that East West Bancorp is a strong income stock thanks to its track record and growing earnings. 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. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Now, if you want to look closer, it would be worth checking out our free research on East West Bancorp management tenure, salary, and performance. 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.