Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. First Hawaiian, Inc. (NASDAQ:FHB) has paid a dividend to shareholders in the last few years. It currently yields 4.0%. Should it have a place in your portfolio? Let’s take a look at First Hawaiian in more detail.
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has the amount of dividend per share grown over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it have the ability to keep paying its dividends going forward?
How well does First Hawaiian fit our criteria?
First Hawaiian has a trailing twelve-month payout ratio of 50%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 46% which, assuming the share price stays the same, leads to a dividend yield of around 4.2%. Furthermore, EPS should increase to $2.18.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider First Hawaiian as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, First Hawaiian generates a yield of 4.0%, which is high for Banks stocks.
Considering the dividend attributes we analyzed above, First Hawaiian is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three key factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for FHB’s future growth? Take a look at our free research report of analyst consensus for FHB’s outlook.
- Valuation: What is FHB worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether FHB is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.