For investors looking for a dependable source of passive income, a systematic screening process is needed to distinguish truly lasting dividend payers from risky high-yield choices. One useful technique involves selecting stocks that not only have a high dividend rating but also show good basic profitability and sound finances. This method focuses on companies with the earnings to maintain their payments and the balance sheet durability to endure economic shifts, with the goal of assembling a portfolio of dividends that can increase over time. A recent screen using this technique identified EAST WEST BANCORP INC (NASDAQ:EWBC) as a stock deserving further review.
Dividend Profile: A Dependable and Increasing Payout
The central attraction of EWBC for income-oriented investors is its long-standing and rising dividend. The company’s ChartMill Dividend Rating of 7 out of 10 indicates a good overall evaluation of its payout policy. A more detailed view of the fundamental analysis report shows the main advantages supporting this rating:
- History and Increase: EWBC has established a dependable record, having paid and, notably, not reduced its dividend for at least ten straight years. Also, the company has raised its dividend at a notable average yearly rate of 15.76% over the last five years, showing a clear intention to give more capital back to shareholders.
- Maintainable Yield: The stock provides a yearly dividend yield of 2.75%. This is not the greatest yield possible, but it is good, positioned just above the industry average of 2.72% and offering a noticeable advantage over the S&P 500's average yield of about 1.82%.
- Payout Maintainability: A crucial measure for dividend investors is the payout ratio. EWBC distributes roughly 26% of its income as dividends, which is seen as a very maintainable level. This keeps most earnings to be put back into the business for future development or to strengthen the balance sheet, creating a large cushion against possible earnings changes.
Supporting Fundamentals: Profitability and Financial Condition
A high dividend rating by itself is insufficient; the payment must be supported by a sound business. This is where the screen’s extra filters for acceptable profitability and condition show their worth, and EWBC satisfies these requirements.
Profitability Quality: The company receives a ChartMill Profitability Rating of 5. Important points include:
- Steady profitability during the past five years.
- Good return measures, with a Return on Equity (ROE) of 14.70% that is better than over 92% of other companies in the banking industry.
- A very good Profit Margin of 44.31%, placing it near the best in its sector.
These measures verify that EWBC is a fundamentally profitable company, producing sufficient income to easily meet its dividend responsibilities.
Sound Financial Condition: With a ChartMill Health Rating of 5, the company displays a steady financial state. The balance sheet review is especially comforting for a bank:
- A very low Debt-to-Equity ratio of 0.01 shows a careful method toward borrowing, doing better than most industry counterparts.
- The company has been steadily lowering its share count over the past one and five years, which can indicate careful capital management and belief in the stock's value.
Valuation and Growth Setting
From a valuation viewpoint, EWBC seems fairly priced. Its Price-to-Earnings (P/E) ratio of 11.62 matches the banking industry average and is much lower than the wider S&P 500. This implies the stock is not priced too high, giving a degree of protection for new investors.
Growth outlooks also stay positive. While future earnings per share (EPS) growth is predicted to slow from its previous high rate, analysts still estimate average yearly growth near 8%, aided by expected revenue growth of almost 11%. This forecasted growth helps support the possibility for ongoing dividend raises.
A Candidate for a Dividend-Focused Portfolio
EAST WEST BANCORP INC makes a strong case for dividend investors using a quality-and-maintainability method. It joins an appealing, rising yield with a lengthy, uninterrupted payment history, all supported by good profitability, a carefully managed balance sheet, and a fair valuation. The stock represents the result of a screen that looks past yield by itself to find companies with the financial strength to keep and raise their dividends over many years.
For investors wishing to do their own study and find similar opportunities, the complete "Best Dividend Stocks" screen is ready to use. You can find more possible stocks that meet these standards of high dividend quality, acceptable profitability, and sound financial condition by running the screen here.
Disclaimer: This article is for information only and does not make up financial guidance, a suggestion, or an offer or request to buy or sell any securities. The information given is based on supplied data and should not be the only foundation for any investment choice. Investors should do their own separate study and talk with a qualified financial consultant before making any investment decisions. Past results are not a guide to future outcomes.
