Don't Buy Hope Bancorp, Inc. (NASDAQ:HOPE) For Its Next Dividend Without Doing These Checks

It looks like Hope Bancorp, Inc. (NASDAQ:HOPE) is about to go ex-dividend in the next 2 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Hope Bancorp's shares before the 6th of February in order to receive the dividend, which the company will pay on the 20th of February.

The company's next dividend payment will be US$0.14 per share, on the back of last year when the company paid a total of US$0.56 to shareholders. Based on the last year's worth of payments, Hope Bancorp has a trailing yield of 4.8% on the current stock price of US$11.66. If you buy this business for its dividend, you should have an idea of whether Hope Bancorp's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See 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 is paying out an acceptable 68% of its profit, a common payout level among most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Hope Bancorp's earnings per share have fallen at approximately 9.4% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Hope Bancorp has lifted its dividend by approximately 6.4% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

The Bottom Line

Has Hope Bancorp got what it takes to maintain its dividend payments? We're not overly enthused to see Hope Bancorp's earnings in retreat at the same time as 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. For example - Hope Bancorp has 1 warning sign we think you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.