Yahoo Finance Cathay General Bancorp (NASDAQ:CATY)'s Could Be A Buy For Its Upcoming Dividend
Cathay General Bancorp (NASDAQ:CATY) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 28th of February, you won't be eligible to receive this dividend, when it is paid on the 12th of March.
Cathay General Bancorp's upcoming dividend is US$0.31 a share, following on from the last 12 months, when the company distributed a total of US$1.24 per share to shareholders. Calculating the last year's worth of payments shows that Cathay General Bancorp has a trailing yield of 3.4% on the current share price of $36.25. If you buy this business for its dividend, you should have an idea of whether Cathay General Bancorp's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Cathay General 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. That's why it's good to see Cathay General Bancorp paying out a modest 36% of its earnings.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Cathay General Bancorp's earnings per share have been growing at 15% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Cathay General Bancorp has delivered 15% dividend growth per year on average over the past ten years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Final Takeaway
Is Cathay General Bancorp worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Cathay General Bancorp ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
Ever wonder what the future holds for Cathay General Bancorp? See what the six analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
