Central Pacific Financial (NYSE:CPF) Has Announced That It Will Be Increasing Its Dividend To US$0.24

Central Pacific Financial Corp.'s (NYSE:CPF) dividend will be increasing to US$0.24 on 15th of September. This makes the dividend yield 3.7%, which is above the industry average.

Check out our latest analysis for Central Pacific Financial

Central Pacific Financial's Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by Central Pacific Financial's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 9.3%. If the dividend continues on this path, the payout ratio could be 49% by next year, which we think can be pretty sustainable going forward.

Central Pacific Financial Doesn't Have A Long Payment History

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 dividend has gone from US$0.32 in 2013 to the most recent annual payment of US$0.96. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

We Could See Central Pacific Financial's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Central Pacific Financial has grown earnings per share at 5.9% per 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.

Our Thoughts On Central Pacific Financial's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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 Central Pacific Financial you should be aware of, and 1 of them doesn't sit too well with us. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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