Bank of Hawaii Corporation (NYSE:BOH) will pay a dividend of $0.70 on the 14th of March. This payment means that the dividend yield will be 3.8%, which is around the industry average.

See our latest analysis for Bank of Hawaii

Bank of Hawaii's Dividend Forecasted To Be Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Having distributed dividends for at least 10 years, Bank of Hawaii has a long 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 shows 80%, which means that Bank of Hawaii would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 52.3% over the next 3 years. For the same time horizon, analysts estimate that the future payout ratio could be 59% which would be quite comfortable going to take the dividend forward.

Bank of Hawaii 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. Since 2015, the annual payment back then was $1.80, compared to the most recent full-year payment of $2.80. This implies that the company grew its distributions at a yearly rate of about 4.5% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth May Be Hard To Come By

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. In the last five years, Bank of Hawaii's earnings per share has shrunk at approximately 9.2% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think Bank of Hawaii 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. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. See if the 5 analysts are forecasting a turnaround in our free collection of analyst estimates here. Is Bank of Hawaii not quite the opportunity you were looking for? Why not check out our selection of top 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.