First Hawaiian, Inc. (NASDAQ:FHB) stock is about to trade ex-dividend in four days. 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase First Hawaiian's shares on or after the 19th of August will not receive the dividend, which will be paid on the 30th of August.

The company's next dividend payment will be US$0.26 per share. Last year, in total, the company distributed US$1.04 to shareholders. Based on the last year's worth of payments, First Hawaiian stock has a trailing yield of around 4.5% on the current share price of US$23.25. If you buy this business for its dividend, you should have an idea of whether First Hawaiian's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for First Hawaiian

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. First Hawaiian is paying out an acceptable 60% of its profit, a common payout level among most companies.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that First Hawaiian's earnings are down 2.1% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last eight years, First Hawaiian has lifted its dividend by approximately 3.3% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

Final Takeaway

Is First Hawaiian worth buying for its dividend? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.