PacWest Bancorp's (NASDAQ:PACW) Dividend Will Be $0.25

PacWest Bancorp's (NASDAQ:PACW) investors are due to receive a payment of $0.25 per share on 28th of February. Based on this payment, the dividend yield will be 3.4%, which is fairly typical for the industry.

See our latest analysis for PacWest Bancorp

PacWest Bancorp's Dividend Forecasted To Be Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

PacWest Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but PacWest Bancorp's payout ratio of 30% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 9.4% over the next 3 years. Analysts estimate the future payout ratio will be 28% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the dividend has gone from $0.72 total annually to $1.00. This works out to be a compound annual growth rate (CAGR) of approximately 3.3% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

PacWest Bancorp May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings have grown at around 3.0% a year for the past five years, which isn't massive but still better than seeing them shrink. While EPS growth is quite low, PacWest Bancorp has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On PacWest Bancorp's Dividend

Overall, a consistent dividend is a good thing, and we think that PacWest Bancorp has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. Taking the debate a bit further, we've identified 2 warning signs for PacWest Bancorp that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.