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

The board of First Hawaiian, Inc. (NASDAQ:FHB) has announced that it will pay a dividend of $0.26 per share on the 31st of May. Based on this payment, the dividend yield on the company's stock will be 4.8%, which is an attractive boost to shareholder returns.

View our latest analysis for First Hawaiian

First Hawaiian's Earnings Will Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Having paid out dividends for 8 years, First Hawaiian has a good history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but First Hawaiian's payout ratio of 60% is a good sign for current shareholders as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to rise by 5.3% over the next year. If the dividend continues on this path, the future payout ratio could be 60% by next year, which we think can be pretty sustainable going forward.

First Hawaiian Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 8 years was $0.80 in 2016, and the most recent fiscal year payment was $1.04. This implies that the company grew its distributions at a yearly rate of about 3.3% over that duration. 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.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though First Hawaiian's EPS has declined at around 2.4% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While First Hawaiian is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for First Hawaiian that investors should know about before committing capital to this stock. 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.