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On the 28 February 2019, PacWest Bancorp (NASDAQ:PACW) will be paying shareholders an upcoming dividend amount of US$0.60 per share. However, investors must have bought the company’s stock before 19 February 2019 in order to qualify for the payment. That means you have only 2 days left! Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at PacWest Bancorp’s most recent financial data to examine its dividend characteristics in more detail.
What Is A Dividend Rock Star?
It is a stock that pays a consistent, reliable and competitive dividend over a long period of time, and is expected to continue to pay in the same manner many years to come. More specifically:
- Its annual yield is among the top 25% of dividend payers
- It consistently pays out dividend without missing a payment or significantly cutting payout
- Its dividend per share amount has increased over the past
- It is able to pay the current rate of dividends from its earnings
- It is able to continue to payout at the current rate in the future
High Yield And Dependable
The company’s dividend yield stands at 5.9%, which is high for Banks stocks. But the real reason PacWest Bancorp stands out is because it has a high chance of being able to continue to pay dividend at this level for years to come, something that is quite desirable if you are looking to create a portfolio that generates a steady stream of income.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of PACW it has increased its DPS from $1.28 to $2.4 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes PACW a true dividend rockstar.
The company currently pays out 62% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 63% which, assuming the share price stays the same, leads to a dividend yield of around 6.0%. Furthermore, EPS should increase to $3.76.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
PacWest Bancorp ticks all the boxes for what I look for in a dividend stock. If you are looking to build an income focused portfolio, this could be one to include. However, given this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three pertinent factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for PACW’s future growth? Take a look at our free research report of analyst consensus for PACW’s outlook.
- Valuation: What is PACW worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether PACW is currently mispriced by the market.
- Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.