Cathay General (CATY) is a Top Dividend Stock Right Now: Should You Buy?

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Based in Los Angeles, Cathay General (CATY) is in the Finance sector, and so far this year, shares have seen a price change of 28.21%. The holding company for Cathay Bank is currently shelling out a dividend of $0.38 per share, with a dividend yield of 2.45%. This compares to the Banks - West industry's yield of 2.54% and the S&P 500's yield of 1.42%.

Looking at dividend growth, the company's current annualized dividend of $1.52 is up 11.8% from last year. Over the last 5 years, Cathay General has increased its dividend 1 times on a year-over-year basis for an average annual increase of 2.11%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Cathay's current payout ratio is 30%, meaning it paid out 30% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for CATY for this fiscal year. The Zacks Consensus Estimate for 2026 is $5.48 per share, representing a year-over-year earnings growth rate of 20.70%.

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, CATY is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of #3 (Hold).

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This article originally published on Zacks Investment Research (zacks.com).

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