HEI in no hurry
to boost dividend
Hawaiian Electric Industries Inc., which last month declared its first stock split in 20 years, said it's not in the financial position yet to raise its quarterly dividend.
The parent of the state's largest utility company and American Savings Bank has been paying dividends continuously for more than 100 years, but it hasn't raised its quarterly payout since increasing it a penny to 62 cents a share from 61 cents in the first quarter of 1998.
Robert F. Clarke, chairman, president and chief executive officer of HEI, told analysts yesterday that he didn't anticipate any dividend increase until the payout ratio from earnings reached 65 percent. At the end of March, HEI's 62-cents-a-share payout represented 77.5 percent of the company's first-quarter earnings of 80 cents a share.
"We have four primary objectives," Clarke said. "Grow earnings; maintain the dividend at its current level, which will be adjusted for the split; maintain strength in our balance sheet; and maintain our credit ratings."
Clarke said the company has the cash flow from its existing operations to support payment of the current dividend but that he wouldn't anticipate a dividend increase until the 65 percent threshold is reached.
Still, Clarke said, "the recent change in the tax laws affecting dividends make companies like HEI more attractive to investors" with a dividend yield of 4.9 percent.
HEI, which last quarter posted a 27.2 percent increase in net income and a 2.9 percent gain in revenues, said the the 2-for-1 stock split will be effective on June 10. The quarterly dividend would revert to 31 cents a share after the split.
American Savings Bank President and CEO Constance Lau said, on the same conference call, that the bank's residential loan portfolio reached a record $1.2 billion in 2003 and topped the previous year's record by 52 percent.
"We were able to handle this record volume because we completed most of our mortgage banking transformation in 2003 -- revamping processes, changing the sales force to a commission sales force, and installing new technology to increase out capabilities and efficiency," Lau said. "The challenge for production in 2004 is the declining refinance market with the rising interest rates, and a tight supply of homes available for sale in Hawaii."
Michael May, president and CEO of Hawaii Electric Co., said the utility plans to file a rate case this fall using 2005 estimates in order to get Public Utilities Commission approval for rate increases and for several demand-side management programs. It will be the first rate case HECO has initiated in about 10 years. In 2001, HECO committed to initiating a rate case within three years and then later extended its request by 12 months.
"It's too early to speculate or deal with the details of this request, but this is an opportunity to examine many new issues that have risen in the last 10 years since we had our last rate case," May said during the conference call.
Clarke said the PUC will determine what the overall impact is going to be on rates and then, in a separate decision, will decide the impact on various classes, such as residential, commercial and large power.
"It's not clear how it's going to work out but, obviously in the past, most jurisdictions' commission try to limit the impact on residential rate payers because those are the voters. So the commission tries to put a disproportionate amount on large commercial users."