Readers hoping to buy Hawaiian Electric Industries, Inc. (NYSE:HE) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Hawaiian Electric Industries' shares on or after the 23rd of February will not receive the dividend, which will be paid on the 10th of March.
The company's next dividend payment will be US$0.35 per share, and in the last 12 months, the company paid a total of US$1.40 per share. Based on the last year's worth of payments, Hawaiian Electric Industries has a trailing yield of 3.5% on the current stock price of $40.32. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hawaiian Electric Industries paid out 60% of its earnings to investors last year, a normal payout level for most businesses.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Hawaiian Electric Industries's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Hawaiian Electric Industries has delivered an average of 1.2% per year annual increase in its dividend, based on the past 10 years of dividend payments.
To Sum It Up
Should investors buy Hawaiian Electric Industries for the upcoming dividend? Hawaiian Electric Industries's earnings per share have been essentially flat, and the company is paying out more than half of its earnings as dividends to shareholders. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.
If you want to look further into Hawaiian Electric Industries, it's worth knowing the risks this business faces. Be aware that Hawaiian Electric Industries is showing 2 warning signs in our investment analysis, and 1 of those is potentially serious...
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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.