Bank of Hawaii's Preferred Stock: A Steady Anchor in Volatile Markets

In an era of historically low yields and market turbulence, income-seeking investors are increasingly turning to high-quality preferred stocks to secure reliable dividends. Among these, Bank of Hawaii Corporation's 4.375% Non-Cumulative Perpetual Preferred Stock (BOH.PR.A) stands out with its robust 6.63% forward yield—a compelling return in a landscape where 10-year Treasury notes offer just 3.8%. This article explores why BOH.PR.A merits consideration for conservative investors, despite its risks, and how its dividend consistency aligns with current market dynamics.

The Case for BOH.PR.A: Yield and Reliability

Bank of Hawaii, a well-capitalized regional bank with a strong presence in Hawaii and the Pacific, has long been a dividend stalwart. Its preferred stock, BOH.PR.A, offers a quarterly dividend of $0.2735 per depositary share, equivalent to an annual payout of $1.094. This translates to a forward yield of 6.63%, based on its recent trading price of approximately $16.50 per share.

The dividend has remained unchanged since its inception, reflecting the bank's prudent financial management. Despite macroeconomic headwinds, including rising interest rates and economic uncertainty, BOH.PR.A has delivered uninterrupted payouts for over a decade. This stability is underscored by the bank's Tier 1 Capital Ratio of 13.93% (as of Q1 2025), well above regulatory requirements, and a solid track record of earnings growth.

Upcoming Ex-Dividend Date: Timing the Opportunity

Investors seeking to capture BOH.PR.A's next dividend payment should note the August 29, 2025 ex-dividend date. To qualify, shares must be purchased by the close of trading on August 28, 2025, with the dividend payable on September 15, 2025.

This consistent quarterly schedule—dividends are paid on February 1, May 1, August 1, and November 1—provides predictable income, a rarity in today's volatile markets.

Risks to Consider

While BOH.PR.A's yield is attractive, it carries notable risks:

1. Non-Cumulative Terms: Unlike cumulative preferred stock, if Bank of Hawaii skips a dividend, investors forfeit the payment permanently. This risk is mitigated by the bank's strong capital position and consistent payout history, but it remains a factor in volatile environments.
2. Interest Rate Sensitivity: Preferred stocks typically decline in value when rates rise, as their fixed dividends become less appealing. BOH.PR.A's price dropped 34% from its liquidation preference of $25 over the past year, reflecting broader rate hikes. Investors should monitor Fed policy and inflation trends.
3. Bank-Specific Risks: While Bank of Hawaii's regional dominance is an asset, its geographic concentration in Hawaii exposes it to local economic shifts, such as tourism fluctuations or natural disasters.

Investment Thesis: A Strategic Play for Income Hunters

BOH.PR.A is best suited for investors prioritizing steady income over capital appreciation. Its 6.63% yield offers a meaningful hedge against low bond yields and inflation, while its quarterly dividends provide liquidity. The bank's fortress-like balance sheet—non-performing assets at just 0.12% and strong net interest margins—supports the likelihood of sustained payouts.

However, investors must weigh the risks:
- Hold for Dividends: Focus on the income stream rather than price appreciation, especially in a rising rate environment.
- Diversify: Pair BOH.PR.A with other income vehicles (e.g., high-quality corporate bonds or REITs) to mitigate sector-specific risks.
- Monitor Rates: Consider trimming exposure if yields on safer assets (e.g., Treasuries) approach BOH.PR.A's yield.

Conclusion

Bank of Hawaii's preferred stock is a compelling option for income-focused investors navigating a low-yield world. Its 6.63% forward yield, consistent dividend history, and the upcoming ex-dividend date on August 29, 2025, make it a pragmatic choice. While risks such as non-cumulative terms and rate sensitivity exist, they are balanced by the bank's financial resilience and the stock's role as a defensive income generator. For those willing to embrace these trade-offs, BOH.PR.A offers a reliable anchor in turbulent markets.

Final Take: Add BOH.PR.A to your portfolio for dividend income—but keep an eye on interest rate trends and diversify to mitigate risk.