Hawaiian Holdings, Inc. (NASDAQ:HA) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 13th of February will not receive this dividend, which will be paid on the 28th of February.
Hawaiian Holdings's next dividend payment will be US$0.12 per share, and in the last 12 months, the company paid a total of US$0.48 per share. Looking at the last 12 months of distributions, Hawaiian Holdings has a trailing yield of approximately 1.7% on its current stock price of $28.34. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Hawaiian Holdings can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Hawaiian Holdings paid out just 10% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Hawaiian Holdings has grown its earnings rapidly, up 30% a year for the past five years. Hawaiian Holdings looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hawaiian Holdings's dividend payments are effectively flat on where they were two years ago.
To Sum It Up
Has Hawaiian Holdings got what it takes to maintain its dividend payments? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Hawaiian Holdings appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Curious what other investors think of Hawaiian Holdings? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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