Central Pacific Financial (NYSE:CPF) Is Paying Out A Dividend Of $0.26

The board of Central Pacific Financial Corp. (NYSE:CPF) has announced that it will pay a dividend of $0.26 per share on the 15th of June. This makes the dividend yield 7.7%, which will augment investor returns quite nicely.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Central Pacific Financial's stock price has reduced by 42% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

Check out our latest analysis for Central Pacific Financial

Central Pacific Financial's Earnings Will Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Central Pacific Financial has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Central Pacific Financial's last earnings report, the payout ratio is at a decent 40%, meaning that the company is able to pay out its dividend with a bit of room to spare.

EPS is set to fall by 8.6% over the next 12 months. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 47%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

Central Pacific Financial Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from $0.32 total annually to $1.04. This means that it has been growing its distributions at 13% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Central Pacific Financial has grown earnings per share at 13% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Central Pacific Financial Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Central Pacific Financial that investors should take into consideration. Is Central Pacific Financial 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.