Dividend Investors: Don't Be Too Quick To Buy Hope Bancorp, Inc. (NASDAQ:HOPE) For Its Upcoming Dividend

By
Simply Wall St
Published
October 24, 2020
NasdaqGS:HOPE

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Hope Bancorp, Inc. (NASDAQ:HOPE) is about to go ex-dividend in just four days. Investors can purchase shares before the 29th of October in order to be eligible for this dividend, which will be paid on the 13th of November.

Hope Bancorp's upcoming dividend is US$0.14 a share, following on from the last 12 months, when the company distributed a total of US$0.56 per share to shareholders. Based on the last year's worth of payments, Hope Bancorp stock has a trailing yield of around 6.5% on the current share price of $8.645. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Hope Bancorp can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Hope Bancorp

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hope Bancorp paid out 55% of its earnings to investors last year, a normal payout level for most businesses.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
NasdaqGS:HOPE Historic Dividend October 24th 2020

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Hope Bancorp's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last eight years, Hope Bancorp has lifted its dividend by approximately 14% a year on average.

The Bottom Line

Is Hope Bancorp an attractive dividend stock, or better left on the shelf? Hope Bancorp's earnings per share have been essentially flat, and the company is paying out more than half of its earnings as dividends to shareholders. Hope Bancorp doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

With that being said, if you're still considering Hope Bancorp as an investment, you'll find it beneficial to know what risks this stock is facing. Our analysis shows 1 warning sign for Hope Bancorp and you should be aware of it before buying any shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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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. 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.
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