Hanmi Financial (NASDAQ:HAFC) Has Affirmed Its Dividend Of $0.25

The board of Hanmi Financial Corporation (NASDAQ:HAFC) has announced that it will pay a dividend of $0.25 per share on the 22nd of May. The dividend yield will be 6.4% based on this payment which is still above the industry average.

View our latest analysis for Hanmi Financial

Hanmi Financial's Earnings Will Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Hanmi Financial has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 42%, which means that Hanmi Financial would be able to pay its last dividend without pressure on the balance sheet.

EPS is set to fall by 3.8% over the next 12 months. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 47%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

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. The dividend has gone from an annual total of $0.28 in 2014 to the most recent total annual payment of $1.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Hanmi Financial has grown earnings per share at 5.9% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Hanmi Financial you should be aware of, and 1 of them doesn't sit too well with us. Is Hanmi Financial not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.