Hawaiian Electric Industries' (NYSE:HE) Upcoming Dividend Will Be Larger Than Last Year's

The board of Hawaiian Electric Industries, Inc. (NYSE:HE) has announced that it will be increasing its dividend on the 10th of March to US$0.35. The announced payment will take the dividend yield to 3.4%, which is in line with the average for the industry.

Check out our latest analysis for Hawaiian Electric Industries

Hawaiian Electric Industries' Earnings Easily Cover the Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last dividend, Hawaiian Electric Industries is earning enough to cover the payment, but the it makes up 198% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to fall by 5.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 65%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Hawaiian Electric Industries 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. The dividend has gone from US$1.24 in 2012 to the most recent annual payment of US$1.40. This means that it has been growing its distributions at 1.2% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Hawaiian Electric Industries May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. However, Hawaiian Electric Industries' EPS was effectively flat over the past five years, which could stop the company from paying more every year.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Hawaiian Electric Industries' payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Hawaiian Electric Industries (1 can't be ignored!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.