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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Hawaiian Electric Industries, Inc. (NYSE:HE) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 24th of February in order to be eligible for this dividend, which will be paid on the 10th of March.
Hawaiian Electric Industries's next dividend payment will be US$0.34 per share. Last year, in total, the company distributed US$1.36 to shareholders. Looking at the last 12 months of distributions, Hawaiian Electric Industries has a trailing yield of approximately 3.9% on its current stock price of $34.9. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Hawaiian Electric Industries paid out 73% of its earnings to investors last year, a normal payout level for most businesses.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Hawaiian Electric Industries, with earnings per share up 3.8% on average over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Hawaiian Electric Industries has lifted its dividend by approximately 0.9% a year on average.
To Sum It Up
Is Hawaiian Electric Industries an attractive dividend stock, or better left on the shelf? Hawaiian Electric Industries has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. In summary, Hawaiian Electric Industries appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
So while Hawaiian Electric Industries looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 1 warning sign for Hawaiian Electric Industries you should be aware of.
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.
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. 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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