Utility company Hawaiian Electric Industries Inc. ( HE - Analyst Report ) posted a solid earnings surprise of 17% in the third quarter, taking its tally of positive surprises to four in the last five quarters. Along with long-term expected earnings growth of 6.4%, this Zacks Rank #2 (Buy) stock also offers a solid dividend yield of 4.9%.

Mixed Quarter

On Nov 7, Hawaiian Electric reported third-quarter earnings of 49 cents per share, beating the Zacks Consensus Estimate of 42 cents by 17%. However, it was 2% below the year-ago figure of 50 cents per share.

Total revenue decreased 2.1% year over year to $867.7 million, primarily due to a sales decline at its electric utility segment. However, the top-line results were $17 million higher than the Zacks Consensus Estimate.

Total operating expenses in the quarter decreased 2% year over year to $776 million. This helped to counter the decline in revenues in the quarter. However, the company expects expenses to increase in the fourth quarter.

In the first nine months of 2012, Hawaiian Electric invested $188 million in the modernization of local electric infrastructure. We believe infrastructure upgrades will help the utility serve its customers more reliably.

Estimates Inch Higher

Over the last 60 days, the 2012 Zacks Consensus Estimate has moved higher by 1.6% to $1.61 per share as 2 out 5 estimates were raised. This reflects estimated year-over-year growth of 11.7%.

Stable Dividend

Hawaiian Electric has been consistently paying dividends to its shareholders for more than 100 years. On Nov 7, the board of directors of the company declared a quarterly dividend of 31 cents. The annualized payout rate of $1.24 per share reflects an attractive dividend yield of 4.9%, substantially higher than the industry average of 2.2%.

Valuation

Shares of Hawaiian Electric currently trade at 15.7x 12-month forward earnings, a 4% premium to the peer group average of 15.1x. Its price-to-book ratio of 1.5 is in-line with the peer group average. Its price-to-sales of 0.7x is a 45% discount to the peer group average of 1.3x.

The company has a trailing 12-month ROE of 10.2%, compared with the peer group average of 10.3%.

The chart below reflects an uptrend in the earnings estimates and price is expected to move along with earnings estimates.

Honolulu, Hawaii-based Hawaiian Electric Industries was founded in 1891. The company along with its subsidiaries provides electricity and banking services in Hawaii. The company mainly utilizes renewable energy sources to produce electricity. The company operates 57 branches and 119 automated teller machines.

With approximately 3,654 employees, the company's market capitalization is $2.46 billion.