Hanmi Financial (NASDAQ:HAFC) Is Increasing Its Dividend To $0.27

The board of Hanmi Financial Corporation (NASDAQ:HAFC) has announced that the dividend on 26th of February will be increased to $0.27, which will be 8.0% higher than last year's payment of $0.25 which covered the same period. This takes the dividend yield to 4.2%, which shareholders will be pleased with.

View our latest analysis for Hanmi Financial

Hanmi Financial's Dividend Forecasted To Be Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Hanmi Financial has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Hanmi Financial's payout ratio of 48% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 33.9%. Analysts estimate the future payout ratio will be 42% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was $0.28, compared to the most recent full-year payment of $1.00. This means that it has been growing its distributions at 14% per annum over that time. 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 Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Hanmi Financial has been growing its earnings per share at 14% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like Hanmi Financial's Dividend

Overall, a dividend increase is always good, and we think that Hanmi Financial is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Hanmi Financial that investors need to be conscious of moving forward. 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.