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Hawaiian Electric Industries Inc. Message Board

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  • igurumo igurumo Jan 8, 2008 8:58 AM Flag

    I am a newcomer here, any advice on HE?

    You ask "whats up with the terrible price action this winter?" Many reasons, but the most prominent one is that HE is consistently PAYING OUT MORE in dividends than it earns. It is EATING its own capital base. To make matters worse, HE ISSUES NEW STOCK each quarter in order to continue to pay an unrealistic dividend (i.e., dilution of earnings even further). Many other considerations why NOT to own this stock, but I don't care to rehash them again. I don't own the stock anymore but when I saw your webname as "ygunstah," I decided to give you my thoughts. My advice: there are far better places to put your money especially if you are a young investor. Good luck!

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    • I don't own the stock any more either, but I was an owner back in 2000 and HE was a ray of light in the dotbust.

      Anyway, I had a look at what you're saying. According to the S&P report (and you can get a similar idea from yahoo numbers) the dividend "payout ratio" climbed to 93% in 2006, so at first glance it looks like they're close to the line but still in bounds. But the 2006 cash flow (available on yahoo) tells a different story: operational cash flow $193m, capital expenditures $210m, and dividend payout $101m. So they overspent, and '05 and '04 look similar.

      And in 2007 it looks like they've been overspending earnings outright, by a pretty big margin.

      Did they make up the shortfall issuing shares? Not really, the float has increased very modestly year after year. Up until '06, it looks like shuffling investments and debt around. But look at the balance sheet for '06, and uh oh! Long term debt suddenly went from $1.1b to $2.7b, yes that's *billion*. That's enough extra debt to cover several years worth of shortfalls; they're taking on debt to pay dividends.

      So I agree with you, looks like HE is eating its capital base. The conservative thing (financially) would be to cut the dividend by 40%-50%. A 4% yield would correspond to a stock price of $14.

      This has to be a sell.


      • 1 Reply to ygunstah
      • Mahalo for that enlightening tidbit Ygunstah.

        My guess is Connie will increase pressure on the Public Utilities Board for a rate increase.

        After all why run a business efficiently when you can shift the burden for your incompetence to the user? Oh excuse me this is Hawaii ;-) We residents are paying 3-4 times the going mainland rate. Hey why not shoot for 10 times!!!

        Yes we too got in HE when the 2000 dotcom bubble burst looking for a have.

        That is why every investor should be concerned with HE's flat/sinking stock performance, shouldn't HE be tracking other utes rise? HE is a speculative play today.

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