Hawaiian Electric Industries, Inc. HE recently announced that its board of directors has declared a cash dividend on its common stock of 34 cents per share, reflecting a 3% hike from the prior payout of 33 cents per share.
Post the issuance of the new rate, the company’s annualized dividend will be $1.36 per share. The amount is payable on Mar 10, 2020, to shareholders on record as of Feb 25. On the indicated annual dividend rate and based on the closing share price on Feb 9, 2021 of $33.98, Hawaiian Electric's dividend yield would be 4%.
Factors Supporting Dividend Hikes
A stable financial position enables Hawaiian Electric to maximize shareholders’ value through regular dividend payouts and share repurchases. As of Sep 30, 2020, the company’s cash and cash equivalents totaled $193.1 million.
Further, as of Sep 30, 2020, Hawaiian Electric's cash inflow from operating activities amounted to $312.3 million. Notably, the company returned $108 million in dividends to its shareholders as of Sep 30, 2020, led by strong operational performance and acceleration of cost synergies.
Going ahead, the company's accelerating revenue growth across its business segments, along with margin expansion, is likely to improve its operating cash flow. The dividend payout ratios for the first nine months of 2020 were 73% compared to the payout ratio of 64% in the whole of 2019. This, in turn, will enable Hawaiian Electric to expand its capital deployment initiatives, including dividend payouts, share repurchases and reinvestments to grow its businesses.
Dividend Hike in the Utility Space
Utilities is known to be a fundamentally strong sector, as demand for its services remains immune to economic cycle fluctuations. Thus, stable earnings and cash flow enable utilities to reward shareholders with regular dividends and share buybacks. This, in turn, puts them in investors’ good books.
In this regard, it is imperative to mention that in January 2021 ONE Gas OGS announced its board of directors’ approval of a 7.4% increase in the quarterly dividend rate to 58 cents. Also, in January, NiSource Inc. NI announced that its board of directors approved an increase in its annual dividend by 5% to 88 cents per share, thus bringing the quarterly dividend to 22 cents. In December 2020, PNM Resources' PNM board raised its annual dividend by 8 cents per share, marking a 6.5% hike.
Price Performance & Zacks Rank
Hawaiian Electric currently carries a Zacks Rank #4 (Sell). Shares of the company have declined 29.4% in the past year compared with the industry’s 12.5% fall.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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