First Hawaiian (NASDAQ:FHB) Is Due To Pay A Dividend Of $0.26

First Hawaiian, Inc. (NASDAQ:FHB) will pay a dividend of $0.26 on the 2nd of December. The dividend yield will be 4.0% based on this payment which is still above the industry average.

Our analysis indicates that FHB is potentially undervalued!

First Hawaiian's Payment Expected To Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

First Hawaiian has a good history of paying out dividends, with its current track record at 6 years. Taking data from its last earnings report, calculating for the company's payout ratio of 55%shows that First Hawaiian would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 25.6% over the next 3 years. Analysts forecast the future payout ratio could be 45% over the same time horizon, which is a number we think the company can maintain.

First Hawaiian Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. Since 2016, the dividend has gone from $0.80 total annually to $1.04. This works out to be a compound annual growth rate (CAGR) of approximately 4.5% a year over that time. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 3.1% per annum over the last five years, which admittedly is a bit slow. First Hawaiian is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

Overall, a consistent dividend is a good thing, and we think that First Hawaiian has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for First Hawaiian that investors should take into consideration. Is First Hawaiian not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.