Hope for Dividend? Why Hope Bancorp is Rather Disappointing

Investors eyeing dividend income should keep an eye on Hope Bancorp. The company's stock will trade ex-dividend in four days, which means that buyers of the stock before August 8 will still be eligible for the upcoming dividend payment, which will be distributed on August 22. This time, Hope Bancorp is paying a dividend of 14 US cents per share. Over the past year, the payout totaled 56 US cents per share, which, at the current stock price of $12.22, corresponds to a dividend yield of approximately 4.6%. However, whether this yield is sustainable is another matter completely—the company's financial fundamentals must not be overlooked. In the past year, Hope Bancorp has distributed 63% of its earnings to investors in the form of dividends, a typical level for many companies. Yet caution is warranted: A payout ratio that is too high can become problematic over time, especially if earnings decline. It is concerning that Hope Bancorp’s earnings per share have decreased by 9.1% annually over the past five years. A decline in earnings reduces the amount available for dividends. Despite an average annual dividend increase of 6.4% over the last ten years, this trend may not be sustainable if corporate profits continue to fall. Our analysis thus leaves us skeptical as to whether Hope Bancorp is genuinely attractive as a dividend stock or if it should rather remain on the shelf. Falling earnings and the high payout ratio do not bode well for the future of the dividend. Even if you are targeting dividends, you should consider the risks associated with Hope Bancorp with particular caution. Dividend hunters, take note: Those wanting to learn more about the prospects and risks of Hope Bancorp can view a detailed analysis and analyst estimates for future dividends here. However, those seeking particularly reliable dividend payers should better review our selection of top dividend stocks.