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

First Hawaiian, Inc. (NASDAQ:FHB) has announced that it will pay a dividend of $0.26 per share on the 29th of November. The dividend yield will be 4.1% based on this payment which is still above the industry average.

See our latest analysis for First Hawaiian

First Hawaiian's Dividend Forecasted To Be Well Covered By Earnings

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

First Hawaiian has a good history of paying out dividends, with its current track record at 8 years. Taking data from its last earnings report, calculating for the company's payout ratio of 59%shows that First Hawaiian would be able to pay its last dividend without pressure on the balance sheet.

EPS is set to fall by 2.2% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 59% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

First Hawaiian Doesn't Have A Long Payment History

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. 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 3.3% a year over that time. First Hawaiian hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. First Hawaiian has seen earnings per share falling at 3.1% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about First Hawaiian's payments, as there could be some issues with sustaining them into the future. While First Hawaiian is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think First Hawaiian is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for First Hawaiian (1 is significant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.