Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Hanmi Financial Corporation (NASDAQ:HAFC) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 31st of January will not receive this dividend, which will be paid on the 27th of February.
Hanmi Financial's next dividend payment will be US$0.24 per share, and in the last 12 months, the company paid a total of US$0.96 per share. Calculating the last year's worth of payments shows that Hanmi Financial has a trailing yield of 5.1% on the current share price of $18.76. If you buy this business for its dividend, you should have an idea of whether Hanmi Financial's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Hanmi Financial paid out 73% of its earnings to investors last year, a normal payout level for most businesses.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Hanmi Financial's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past six years, Hanmi Financial has increased its dividend at approximately 23% a year on average.
To Sum It Up
Is Hanmi Financial an attractive dividend stock, or better left on the shelf? Hanmi Financial's earnings are effectively flat over recent years, even as the company pays out more than half of its earnings to shareholders as dividends. We think there are likely better opportunities out there.
Curious what other investors think of Hanmi Financial? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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