Central Pacific Financial (NYSE:CPF) Is Due To Pay A Dividend Of $0.26

Central Pacific Financial Corp. (NYSE:CPF) will pay a dividend of $0.26 on the 15th of December. The dividend yield will be 6.7% based on this payment which is still above the industry average.

See our latest analysis for Central Pacific Financial

Central Pacific Financial's Earnings Will Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Having distributed dividends for at least 10 years, Central Pacific Financial has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Central Pacific Financial's payout ratio of 44% is a good sign as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to fall by 10.2% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 51% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Central Pacific Financial Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.32 in 2013, and the most recent fiscal year payment was $1.04. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

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 Central Pacific Financial has been growing its earnings per share at 7.9% 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.

Central Pacific Financial Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend 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. As an example, we've identified 1 warning sign for Central Pacific Financial that you should be aware of before investing. 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.