The board of Bank of Hawaii Corporation (NYSE:BOH) has announced that it will pay a dividend of $0.70 per share on the 14th of March. The dividend yield will be 4.5% based on this payment which is still above the industry average.

See our latest analysis for Bank of Hawaii

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

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Bank of Hawaii has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Bank of Hawaii's last earnings report, the payout ratio is at a decent 67%, meaning that the company is able to pay out its dividend with a bit of room to spare.

EPS is set to fall by 8.8% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 71% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Bank of Hawaii Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from $1.80 total annually to $2.80. This works out to be a compound annual growth rate (CAGR) of approximately 4.5% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Bank of Hawaii has seen earnings per share falling at 4.8% per year over the last five years. 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.

Our Thoughts On Bank of Hawaii's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Bank of Hawaii that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.