First Hawaiian, Inc. (NASDAQ:FHB) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 21st of August, you won’t be eligible to receive this dividend, when it is paid on the 4th of September.
First Hawaiian’s upcoming dividend is US$0.26 a share, following on from the last 12 months, when the company distributed a total of US$1.04 per share to shareholders. Based on the last year’s worth of payments, First Hawaiian stock has a trailing yield of around 5.7% on the current share price of $18.11. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether First Hawaiian has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for First Hawaiian
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. First Hawaiian is paying out an acceptable 68% of its profit, a common payout level among most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren’t growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. 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 not enthused to see that First Hawaiian’s earnings per share have remained effectively flat over the past five years. It’s better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, four years ago, First Hawaiian has lifted its dividend by approximately 6.8% a year on average.
The Bottom Line
Should investors buy First Hawaiian for the upcoming dividend? Earnings per share have not grown at all, and the company pays out a bit over half its profits to shareholders. This is not an overtly appealing combination of characteristics, and we’re just not that interested in this company’s dividend.
So if you’re still interested in First Hawaiian despite it’s poor dividend qualities, you should be well informed on some of the risks facing this stock. Our analysis shows 1 warning sign for First Hawaiian and you should be aware of it before buying any shares.
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.
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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