The board of First Hawaiian, Inc. (NASDAQ:FHB) has announced that it will pay a dividend of $0.26 per share on the 28th of February. Based on this payment, the dividend yield will be 3.8%, which is fairly typical for the industry.
See our latest analysis for First Hawaiian
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.
First Hawaiian has established itself as a dividend paying company, given its 8-year history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but First Hawaiian’s payout ratio of 58% is a good sign for current shareholders as this means that earnings decently cover dividends.
Over the next 3 years, EPS is forecast to expand by 26.4%. Analysts estimate the future payout ratio will be 49% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
First Hawaiian’s dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 8 years was $0.80 in 2017, and the most recent fiscal year payment was $1.04. This means that it has been growing its distributions at 3.3% per annum over that time. It’s good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn’t want to depend on this dividend too heavily.
Some investors will be chomping at the bit to buy some of the company’s stock based on its dividend history. However, initial appearances might be deceiving. It’s not great to see that First Hawaiian’s earnings per share has fallen at approximately 3.2% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
Overall, it’s nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company hasn’t been paying a very consistent dividend over time, despite only paying out a small portion of earnings. Overall, we don’t think this company has the makings of a good income stock.
