Bank of Hawaii's Preferred Stock, Series B Yield Pushes Past 7.5%

Bank of Hawaii Corp's 8.000% Non-Cumulative Perpetual Preferred Stock, Series B (BOH.PRB), yielded above 7.5% on Wednesday, significantly outperforming the 6.48% average for financial preferred stocks. The shares traded at a 6.76% premium to their liquidation preference, contrasting with the sector's average 10.36% discount. Investors should note its non-cumulative nature, implying missed dividends are not recoverable. BOH.PRB traded flat on the day, while the common shares (BOH) saw a modest gain.

Analysis

Bank of Hawaii Corp's Series B perpetual preferred stock (BOH.PRB) is offering a yield exceeding 7.5%, based on its annualized $2.00 dividend, which is notably higher than the 6.48% average for preferred stocks in the financial sector. This superior yield is reflected in its valuation, with shares trading at a 6.76% premium to their liquidation preference, in stark contrast to the sector's average discount of 10.36%. A critical risk factor for this instrument is its non-cumulative nature, meaning any missed dividend payments are permanently forfeited and do not have to be paid back to shareholders. On the day of the report, BOH.PRB shares were trading flat, while the company's common stock (BOH) registered a minor 0.2% gain, suggesting distinct investor sentiment and trading dynamics between the two classes of securities.

Key Decisions for Investors

• For income-focused portfolios, the 7.5%+ yield on BOH.PRB is attractive relative to the financial sector average, but this requires accepting a valuation premium.
• Investors must carefully weigh the high yield against the non-cumulative feature, which elevates risk in the event of financial stress as missed dividends are not recoverable.
• Consider the relative value proposition, as BOH.PRB trades at a premium to its liquidation value while peers are at a discount, potentially limiting capital appreciation compared to other opportunities in the sector.
• Monitor the financial health and common stock dividend policy of Bank of Hawaii Corp (BOH) as a key indicator of the stability and sustainability of the preferred dividend payments.