The board of Hope Bancorp, Inc. (NASDAQ:HOPE) has announced that it will pay a dividend of $0.14 per share on the 20th of February. The dividend yield will be 4.7% based on this payment which is still above the industry average.

Hope Bancorp's Payment Expected To Have Solid Earnings Coverage

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

Hope Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Despite this history however, the company's latest earnings report actually shows that it didn't have enough earnings to cover its dividends. This is very worrying for shareholders, as this shows that Hope Bancorp will not be able to sustain its dividend at its current rate.

According to analysts, EPS should be several times higher in the next 3 years. They also expect the future payout ratio to be 41% over the same period, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

Hope Bancorp Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2016, the annual payment back then was $0.40, compared to the most recent full-year payment of $0.56. This means that it has been growing its distributions at 3.4% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Hope Bancorp's earnings per share has shrunk at 12% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Hope Bancorp's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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.