Central Pacific Financial Corp. (NYSE:CPF) will pay a dividend of $0.26 on the 15th of December. This makes the dividend yield 6.7%, which will augment investor returns quite nicely.

Check out our latest analysis for Central Pacific Financial

Central Pacific Financial's Earnings Will Easily Cover The Distributions

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

Central Pacific Financial has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Central Pacific Financial's last earnings report, the payout ratio is at a decent 44%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to fall by 10.2%. Fortunately, analysts forecast the future payout ratio to be 51% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Central Pacific Financial Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $0.32, compared to the most recent full-year payment of $1.04. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Central Pacific Financial Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Central Pacific Financial has grown earnings per share at 7.9% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Central Pacific Financial Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Central Pacific Financial that investors should take into consideration. Is Central Pacific Financial 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.