First Hawaiian (NASDAQ:FHB) Will Pay A Dividend Of $0.26

First Hawaiian, Inc. (NASDAQ:FHB) will pay a dividend of $0.26 on the 2nd of June. This makes the dividend yield 6.4%, which will augment investor returns quite nicely.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. First Hawaiian's stock price has reduced by 40% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

View our latest analysis for First Hawaiian

First Hawaiian's Earnings Will Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

First Hawaiian has established itself as a dividend paying company, given its 6-year history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 48%shows that First Hawaiian would be able to pay its last dividend without pressure on the balance sheet.

EPS is set to fall by 12.8% over the next 12 months. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 60%, which would be comfortable for the company to continue in the future.

First Hawaiian Is Still Building Its Track Record

It is great to see that First Hawaiian has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of $0.80 in 2017 to the most recent total annual payment of $1.04. This works out to be a compound annual growth rate (CAGR) of approximately 4.5% a year 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.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that First Hawaiian has been growing its earnings per share at 9.1% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

First Hawaiian Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

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. Just as an example, we've come across 2 warning signs for First Hawaiian you should be aware of, and 1 of them shouldn't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.