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Bank of Hawaii (BOH) is a Top Dividend Stock Right Now: Should You Buy?

All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Bank of Hawaii in Focus

Headquartered in Honolulu, Bank of Hawaii (BOH) is a Finance stock that has seen a price change of 20.56% so far this year. The bank holding company is paying out a dividend of $0.65 per share at the moment, with a dividend yield of 3.2% compared to the Banks - West industry's yield of 2.26% and the S&P 500's yield of 1.99%.

Looking at dividend growth, the company's current annualized dividend of $2.60 is up 11.1% from last year. In the past five-year period, Bank of Hawaii has increased its dividend 4 times on a year-over-year basis for an average annual increase of 8.47%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Bank of Hawaii's payout ratio is 47%, which means it paid out 47% of its trailing 12-month EPS as dividend.

BOH is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $5.59 per share, which represents a year-over-year growth rate of 6.88%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, BOH is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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