First Hawaiian, Inc. (NASDAQ:FHB) will pay a dividend of $0.26 on the 2nd of September. This means the annual payment is 3.7% of the current stock price, which is above the average for the industry.
First Hawaiian's Earnings Will Easily Cover The Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.
Having paid out dividends for 6 years, First Hawaiian has a good history of paying out a part of its earnings to shareholders. Based on First Hawaiian's last earnings report, the payout ratio is at a decent 56%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Looking forward, EPS is forecast to rise by 16.6% over the next 3 years. Analysts forecast the future payout ratio could be 48% over the same time horizon, which is a number we think the company can maintain.
First Hawaiian Is Still Building Its Track Record
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2016, the annual payment back then was $0.80, compared to the most recent full-year payment of $1.04. This means that it has been growing its distributions at 4.5% per annum over that time. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.
First Hawaiian May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. However, First Hawaiian has only grown its earnings per share at 3.1% per annum over the past five years. Growth of 3.1% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
Our Thoughts On First Hawaiian's Dividend
Overall, we think First Hawaiian is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for First Hawaiian that investors should take into consideration. Is First Hawaiian not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
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