The board of First Hawaiian, Inc. (NASDAQ:FHB) has announced that it will pay a dividend of $0.26 per share on the 29th of November. This makes the dividend yield 4.1%, which will augment investor returns quite nicely.

See our latest analysis for First Hawaiian

First Hawaiian's Dividend Forecasted To Be Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Having paid out dividends for 8 years, First Hawaiian has a good history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 59%shows that First Hawaiian would be able to pay its last dividend without pressure on the balance sheet.

EPS is set to fall by 2.2% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 59% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

First Hawaiian Doesn't Have A Long Payment History

It is great to see that First Hawaiian has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of $0.80 in 2016 to the most recent total annual payment of $1.04. This implies that the company grew its distributions at a yearly rate of about 3.3% over that duration. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

First Hawaiian May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. In the last five years, First Hawaiian's earnings per share has shrunk at approximately 3.1% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments First Hawaiian has been making. We don't think First Hawaiian is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for First Hawaiian (1 doesn't sit too well with us!) 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.