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It looks like First Hawaiian, Inc. (NASDAQ:FHB) is about to go ex-dividend in the next 4 days. Investors can purchase shares before the 23rd of August in order to be eligible for this dividend, which will be paid on the 6th of September.
First Hawaiian's next dividend payment will be US$0.26 per share, on the back of last year when the company paid a total of US$1.04 to shareholders. Based on the last year's worth of payments, First Hawaiian has a trailing yield of 4.1% on the current stock price of $25.22. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for First Hawaiian
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. First Hawaiian is paying out an acceptable 50% of its profit, a common payout level among most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at First Hawaiian, with earnings per share up 5.2% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. First Hawaiian has delivered 9.1% dividend growth per year on average over the past 3 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Has First Hawaiian got what it takes to maintain its dividend payments? First Hawaiian has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.