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Reasons to Add Hawaiian Electric (HE) to Your Portfolio

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Hawaiian Electric Industries Inc.’s (HE - Free Report) focus on adding more clean sources to the generation portfolio, the recovery in demand from the tourism industry and efficient debt management are likely to drive its performance.

Let’s focus on the factors that make this Zacks Rank #2 (Buy) stock a strong investment pick at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Growth Projection & Surprise History

The Zacks Consensus Estimate for Hawaiian Electric Industries’ 2022 earnings has moved up by 1.4% in the past 60 days to $2.19 per share.

HE’s long-term (three to five years) earnings growth is projected at 3.2%.

Hawaiian Electric Industries delivered an average earnings surprise of 30.8% in the last four quarters.

Revival of Tourism Industry

Hawaiian Electric Industries continues to observe a gradual recovery in the tourism industry. Domestic visitor arrivals remained strong at the end of March 2022 and increased by nearly 10% more than the same month in pre-pandemic times. The gradual pick up of international travelers is going to drive the demand for utility services and likely boost the performance of Hawaiian Electric Industries.

Dividend

Hawaiian Electric Industries has a long history of dividend payments and has paid out dividends to shareholders consecutively since 1901. Dividend payout ratios for the first three months of 2022 were 55% to 60%. On May 5, 2022, HE’s Board of Directors approved a 2.9% increase in the quarterly dividend to 35 cents per share from 34 cents in 2021.

Currently, Hawaiian Electric Industries has a dividend yield of 3.2% compared with the industry average of 3%.

Investment & Renewable Generation

Hawaiian Electric Industries continues to make significant investments to drive its renewable portfolios and improve the system’s reliability for efficient energy distribution. HE invested $302 million in 2021 and expects the 2022 capital investment in the range of $350-$400 million. It expects to invest nearly $2 billion over the next five years to further strengthen its operations.

Hawaiian Electric Industries is also taking significant measures to achieve the goal of net-zero carbon emissions from power generation by 2045 or sooner. To meet the collective long-term goal, Hawaiian Electric Industries has 400 megawatts of energy and roughly 2.5 gigawatt hours of storage scheduled to come online by year-end 2024. HE is pursuing numerous additional procurements and programs to grow renewable energy storage and grid service resources in the system.

Debt Position

The Debt to Capital of Hawaiian Electric Industries at the end of the first quarter of 2022 was 52.3% compared with the industry average of 58.3%. This indicates that the company is using comparatively lower debts to manage the business compared with peers.

Return on Equity

Return on Equity (“ROE”) indicates how efficiently a company is utilizing shareholders’ funds in the business to generate returns. At present, Hawaiian Electric Industries’ ROE is 10.7%, higher than the industry average of 10.3%. This indicates that the company is utilizing the funds more effectively than industry peers.

Price Performance

In the past six months, HE stock has rallied 6.7% compared with the industry’s 6.2% rise.

Zacks Investment Research
Image Source: Zacks Investment Research

Other Stocks to Consider

Some other similar-ranked stocks from the same sector include American Electric Power (AEP - Free Report) , DTE Energy (DTE - Free Report) and American Water Works (AWK - Free Report) .

The long-term earnings growth of American Electric Power, DTE Energy and American Water Works is projected at 6%, 6.2% and 8.1% respectively.

The Zacks Consensus Estimate for 2022 earnings per share of American Electric Power, DTE Energy and American Water Works has moved up 5.7%, 0.8% and 4.9%, respectively, year over year.

AEP, DTE and AWK delivered an average earnings surprise of 2.4%, 9% and 5.3%, respectively, in the last four quarters.