Bank of Hawaii (NYSE:BOH) Will Pay A Dividend Of $0.70

Bank of Hawaii Corporation (NYSE:BOH) has announced that it will pay a dividend of $0.70 per share on the 15th of September. This makes the dividend yield 4.9%, which will augment investor returns quite nicely.

See our latest analysis for Bank of Hawaii

Bank of Hawaii'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.

Having distributed dividends for at least 10 years, Bank of Hawaii has a long history of paying out a part of its earnings to shareholders. Based on Bank of Hawaii's last earnings report, the payout ratio is at a decent 55%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next year, EPS is forecast to fall by 19.7%. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 73%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

Bank of Hawaii Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the annual payment back then was $1.80, compared to the most recent full-year payment of $2.80. This implies that the company grew its distributions at a yearly rate of about 4.5% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Bank of Hawaii's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Bank of Hawaii is struggling to find viable investments, so it is returning more to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

We Really Like Bank of Hawaii's Dividend

Overall, we like to see the dividend staying consistent, and we think Bank of Hawaii might even raise payments in the future. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Bank of Hawaii that investors should take into consideration. Is Bank of Hawaii 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.