Don't Race Out To Buy PacWest Bancorp (NASDAQ:PACW) Just Because It's Going Ex-Dividend

By
Simply Wall St
Published
November 23, 2020
NasdaqGS:PACW

It looks like PacWest Bancorp (NASDAQ:PACW) is about to go ex-dividend in the next 3 days. Investors can purchase shares before the 27th of November in order to be eligible for this dividend, which will be paid on the 10th of December.

PacWest Bancorp's upcoming dividend is US$0.25 a share, following on from the last 12 months, when the company distributed a total of US$1.00 per share to shareholders. Last year's total dividend payments show that PacWest Bancorp has a trailing yield of 4.1% on the current share price of $24.31. If you buy this business for its dividend, you should have an idea of whether PacWest Bancorp's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for PacWest Bancorp

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. PacWest Bancorp reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
NasdaqGS:PACW Historic Dividend November 23rd 2020

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. PacWest Bancorp reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, PacWest Bancorp has increased its dividend at approximately 38% a year on average.

We update our analysis on PacWest Bancorp every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Is PacWest Bancorp an attractive dividend stock, or better left on the shelf? It's definitely not great to see that it paid a dividend despite reporting a loss last year. Worse, the general trend in its earnings looks negative in recent times. PacWest Bancorp doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with PacWest Bancorp. In terms of investment risks, we've identified 2 warning signs with PacWest Bancorp and understanding them should be part of your investment process.

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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