5 Bank Stocks That Need a Higher Dividend (Update 1)

4. East West Bancorp

East West Bancorp (EWBC) of Pasadena, Calif., closed at $21.99 Friday, returning 11% year-to-date. The company announced on Jan. 20 that it would double its quarterly dividend during the first quarter, to 10 cents a share. Based on the new payout, the forward dividend yield on the shares is 1.82%.

The company also announced a new stock repurchase authorization, to buy back up to $200 million worth of common shares.

East West Bancorp reported fourth-quarter earnings available to common shareholders of $64.5 million, or 43 cents a share, increasing from $60.7 million, or 41 cents a share in the third quarter, and $32.2 million, or 22 cents a share, in the fourth quarter of 2010.

The year-over-year earnings increase reflects a decline in the quarterly provision for loan losses to $20 million from $29.8 million, and the prior year period's net decrease in Federal Deposit Insurance Corp. indemnification assets of 36 million, related to earlier failed-bank acquisitions. The indemnification assets declined by $20.4 million during the fourth quarter of 2012.

The net interest margin was a strong 4.13% in the fourth quarter, increasing from 3.98% the previous quarter, but following a trend for most regional banks in the prolonged low-rate, declining from 4.43% a year earlier.

Total loans increased 2% during the fourth quarter to $14.5 billion as of De. 31, with commercial and trade financing loans growing 4% to $3.1 billion, and single family mortgage loans growing 18%, to $1.8 billion.

Average noninterest-bearing deposits grew 7% during the fourth quarter and 30% year-over-year, to $3.5 billion, as of Dec. 31.

East West Bancorp's ROA has ranged between 1.07% and 1.21%, over the past five quarters.

Sterne Agee analyst Brett Rabatin on Jan. 23 reiterated his "Buy" rating for East West Bancorp and raised his price target by two dollars to $25, counting on "outperformance for the shares is likely as a higher valuation ensues from less consternation about the [net interest margin] as run-off of covered assets occurs." The higher price target is based on a multiple of 12.5 times the analyst's 2013 EPS estimate of $2.2.

The shares trade for 1.8 times tangible book value and for 12 times the consensus 2012 EPS estimate of $1.79.

Interested in more on East West Bancorp? See TheStreet Ratings' report card for this stock.

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