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Hawaiian Electric Industries: A Stable Stock, Consider It for High Yield

March 27, 2014 | About:



Ever since the evolution of electricity, demand for electric power has been always been rising exponentially. To satisfy America's need for the ever growing demand of power, various companies are looking to generate more power by use of conventional and non-conventional methods. Hawaiian Electric Industries (HE) is one such company in the U.S. that supplies 95% of electricity in Hawaii with its customer base of over 450,000.

Hawaiian Electric Industries (HE) not only have various subsidiaries for power generations but also operates a financial institute that fund projects through American Saving Bank. The various subsidiaries of HE is Maui Electric Company, HECO and Hawaii Electric Light Company providing utility services.

The company recently declared fourth quarter 2014 results that were not alarming on revenue grounds, but earnings did beat the consensus estimates and were alarming.


Total net revenue recorded in fourth quarter 2014 was $826.4 million, marginal decline by 1.4% year ago quarter ($838.14 million). The reported revenue was also below the consensus estimates of $915 million. The decline in revenue was mainly due to a lower electricity sale and less revenue from the financial subsidiaries. Despite the revenue decrease, income showed a phenomenal growth. Hawaiian Electric Industries recorded an operating income of $72.3 million, 94% growth compared with same quarter last year ($37.272 million). Cost saving measures adopted by the company helped it to bring down the expenses by 5.8% that was recorded to $754.2 million. EPS of $0.39 for the current quarter was flat with year ago quarter but it did beat the consensus estimate marginally by $0.02.

Utility services contributed net income of $59.5 million, a growth by over $30.0 million as against the year ago quarter ($19.44 million). The banking division recorded $17.8 million a decline in net income by $4.3 million from last year. As we analyze the bottom line, we observe that Hawaiian Electric Industries Utility division majorly contributed to the growth in earnings to offset lower earnings from the banking. The low interest rates and slowdown in mortgage market was the main cause of slight decline in earnings for banking segment.

Journey Ahead

Hawaiian Electric Industries is mainly focused on lowering the high oil bill for the customers. It is also investing in infrastructure to ensure stable services to its customers. With Enhanced infrastructure facility, it will always provide high end support to its customers, and this in-turn will benefit the future growth of the company. Its policy for acquiring and integrating local renewal energy allows it to offer lower prices as compared to oil-based energy. So the company is making some decent moves for sustained growth in the future.

The company also restored a 20 MW wind power and is now operating in full capacity. Since 2012 this plant was suspended from all operation due to batteries catching fire and creating a hazardous working environment. With the new innovative technology the wind farm is now successfully operating. This will also benefit the company in the upcoming quarters and a brighter future.


The American Electric Power (AEP) is also a power generation company with over 5 million customers in 11 different states of US.

In fourth quarter 2013, it reported a revenue of $3.8 billion, growth by $0.2 billion over year ago quarter. Operating earnings also grew from $242 million to $296 million from year ago quarter. EPS on GAAP basis was reported as $0.71, an increase of $0.66 as compared to the year ago quarter ($0.05). While operating earnings were recorded as $0.60, increased by $0.10 as compared to the year ago quarter ($0.50).

The company benefited from unbeaten rigid proceedings in several jurisdictions. It also benefited from the investment that it had made on transmission which resulted in earnings growth in each quarter of the year 2013, with transmission nearly doubling its earnings contribution in 2013.

Looking ahead, the company has entered into agreement a joint venture programs for its global power projects in various countries like Chile and Vietnam. The company also efficiently uses its asset management to invest in a newer market. This policy also helps the company to keep the operational overhead cost under control.


Hawaiian Electric Industries is a stable stock. Its 52-week band is very narrow, in the range of $24.84 to $28.30. It also offers a luscious dividend of 4.6%. This can also be a reason that investors looking for dividend paying companies can always consider this stock. The company has been divesting non-core assets and focusing on other growing regions. It is also optimistic about its long term earning growth prospects and anticipates earning growth strategy in the range of 4% to 6%, primarily driven by transmission growth and strategic investment in utility infrastructure and cost controls.

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