Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term Bank of Hawaii Corporation (NYSE:BOH) shareholders have had that experience, with the share price dropping 33% in three years, versus a market return of about 22%.

Now let’s have a look at the company’s fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

View our latest analysis for Bank of Hawaii

To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the three years that the share price fell, Bank of Hawaii’s earnings per share (EPS) dropped by 5.1% each year. This reduction in EPS is slower than the 12% annual reduction in the share price. So it seems the market was too confident about the business, in the past.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It might be well worthwhile taking a look at our free report on Bank of Hawaii’s earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Bank of Hawaii’s TSR for the last 3 years was -24%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It’s nice to see that Bank of Hawaii shareholders have received a total shareholder return of 29% over the last year. Of course, that includes the dividend. There’s no doubt those recent returns are much better than the TSR loss of 2% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we’ve identified 1 warning sign for Bank of Hawaii that you should be aware of.

We will like Bank of Hawaii better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Sandwich Isles Communications violated state laws and its obligations to its customers when it cut telephone and broadband services earlier this month without ample warning and is likely to face penalties for abandoning its services, according to testimony Monday before the Hawaii Public Utilities Commission.

Sandwich Isles’ President Al Hee was in the hot seat for much of Monday’s six-hour hearing to determine if the company broke the law when it gave its customers just a week’s notice that service could be terminated in late May. Its customers were given even less notice when services were actually cut in early June.

State and federal laws as well as Sandwich Isles’ certificate of authority, which allow it to operate in the state, require at least 30 days notice.

“There’s no doubt that we did not conform with the certificate of authority,” Hee said in his closing arguments.

The impact to Hawaiian homeland beneficiaries in Kahikinui on Maui and Puukapu on Hawaii island were particularly significant. They are far from areas that have cell service, and the shutdown of telephone services presented safety issues when households were unable to contact emergency services.

Hee argued that state and federal authorities should have been aware of the impending shutdown because Sandwich Isles has been losing money for at least the last four years. He blamed decisions made by the state Department of Hawaiian Home Lands to allow other carriers to operate on homesteads, thereby shrinking Sandwich Isles’ customer base.

State regulators and attorneys for the consumer advocate didn’t seem to buy that.

“There’s a lot of finger pointing going on, but I don’t hear a lot of accountability for this error,” Scott Boone, a state attorney representing the consumer advocate, said.

The PUC is expected to issue a written order that lays out what penalties, if any, Sandwich Isles will face and what the next steps will be to address the ongoing service disruption, PUC Chairman Leo Asuncion said.

Hee argued that the Hawaiian Homes Commission, and not the PUC, has jurisdiction in a case like this involving a provider on Hawaiian homelands. He also contended that the rules the commission was operating under didn’t apply to a company like Sandwich Isles, which was initially created to be the only company that serviced homesteads in rural areas.

But over the years, DHHL opened the way for other telephone and broadband providers to hook up people on homelands. Hee believes that lead to the financial ruin of his company.

The company defaulted on more than $130 million in federal loans, and a federal court entered a monetary judgment against it in 2020. That same year, the Federal Communications Commission fined Hee $50 million for violations related to fraud, charges that sent Hee to federal prison in 2016.

But what really did in Sandwich Isles, according Hee, was a recent bid by Hawaiian Telcom to acquire the conduits that bring connectivity to homes without also acquiring the equipment necessary to actually plug in those households. Because that equipment is still owned by Sandwich Isles, the company had a duty to provide services to its customers despite its financial straits.

Waimana Enterprises, Sandwich Isles’ parent company, also put in a bid for the conduits but lost to Hawaiian Telcom. Under questioning by commissioners, Hee implied that Sandwich Isles and Waimana are no longer responsible for people on homelands.

“If no one is truly interested in doing it other than Sandwich Isles and Waimana, that’s not our kuleana,” Hee said. “We’re not the people responsible for those Hawaiians out there that don’t have services. We were the solution.”

Boone’s questions focused on public safety concerns DHHL raised in written responses to the PUC’s subpoenas. Some households may not be able to dial 911 because their landlines and internet are down and they are out of the range of cell service.

Boone asked Hee if anyone at Sandwich Isles researched which of their customers would still have access to internet if their phone lines were cut. Hee said the company had not.

“We terminated service because we ran out of money. We didn’t research anything,” Hee said.

Hee said several times during the hearing that he wasn’t able to provide specific answers because he did not participate in the day-to-day operations of Sandwich Isles. All of its remaining 25 to 30 employees were terminated June 1, according to Hee.

Under questioning from Boone, Hee said the areas he knew that had lost voice services included Kahikinui on Maui, Puukapu on Hawaii island, parts of Molokai, and areas of Kauai. Hee also said that DHHL offices as well as Sandwich Isles’ other clients like the U.S. Coast Guard and Target still have service because of contractural obligations with those entities.

Caroline Ishida, the PUC’s chief counsel, wanted more specifics on where there are service outages, as well as where households may still have connectivity because they were not automatically disconnected yet.

“Does anyone out in the world know where those services are if you don’t know?” Ishida asked.

“I don’t know,” Hee said.

Ishida also asked if Sandwich Isles would refund customers who still paid their bills even while their services were down.

“Absolutely, no question about it,” Hee said.

The interactions between Hee and the PUC heated up once the commissioners had their turn to ask questions.

In one exchange, Hee said Sandwich Isles could restart services if the PUC could ensure it starts gaining revenue.

“If we order you to restart service, do you have the financial and personnel and technical capacity to perform that restart of service?” Commissioner Colin Yost asked.

“As long as that order has money attached to it, yes,” Hee said.

Commissioner Naomi Kuwaye pressed Hee on how much financial assistance Sandwich Isles’ parent company, Waimana Enterprises, is able to provide the beleaguered telecommunications company. Hee said Waimana’s financial support has already been in the millions.

Both Kuwaye and Yost asked repeatedly why Sandwich Isles did not notify its customers in advance that they would lose service, and asked Hee if he understood that Sandwich Isles’ certificate of authority required that.

“That’s what you got, and there are rules established that govern what happens under a COA. You are not disputing that,” Yost said.

“I am not disputing that,” Hee replied.

Picture this: you’re ready for a relaxing day at the beach, sunblock applied and book in hand. But instead of unwinding, you find yourself anxiously clutching a waterproof bag with your phone, keys, and wallet bobbing in the ocean beside you. According to the Honolulu Police Department, this is the new norm for safeguarding your valuables. While the intention behind the advice might be sound, it poses practical questions about usability and even risks to personal electronics.

Bridging the safety perception gap.

In a place celebrated for its laid-back vibes and stunning landscapes, the contrast between the promoted safety and actual experiences can be stark. Reports and statistics paint a picture of declining crime rates, yet the police department’s advisory to hold onto your valuables while swimming seems to undermine these claims. If Hawaii is as safe as advertised, why do such drastic measures feel necessary?

The local’s take: is this advice practical or preposterous?

As someone who has spent countless days enjoying Hawaii’s beaches without incident over decades, the recommendation to swim with my valuables feels more comical than practical. It suggests a lack of effective, on-the-ground strategies to deal with theft and other safety issues proactively. Moreover, the advice might even lead to new problems, like damaged electronics or distracted swimmers.

When we travel to another island, we usually wrap the rental car key in a towel and place it near the lifeguard station with our other belongings. Our cell phone and wallet (with limited cash and a credit card) are left hidden under the car seat and out of view before leaving. In all the years we have lived on Kauai and traveled to other islands, we have thankfully never had an issue.

Salt water and cell phones don’t mix.

When cell phones get wet with salt water, like from the ocean in Hawaii, bad things can occur. Salt water is particularly harmful because it is highly conductive and corrosive. In contact with the metal components inside a cell phone, it can cause oxidation and corrosion leading to permanent damage. When the salt water dries, it leaves behind minerals that can form causing further damage.

Some say that if your phone gets wet in salt water, keep it turned off then immediately dry it then place in a bag with a desiccant or dry rice. This may help absorb moisture, but it has not worked for us!

Conclusion: a call for realistic and practical safety strategies.

Hawaii’s reputation as a safe tourist haven is valuable, and maintaining it requires more than just reactive measures. It’s time for local authorities to rethink how they address safety concerns, ensuring that their advice doesn’t just shift the burden to tourists but genuinely enhances their security. Let’s hope for a strategy that supports uninterrupted enjoyment of Hawaii’s beautiful shores rather than turning beachgoers into anxious guardians of their gear.

What’s your take on the Honolulu Police Department’s advice? Have you ever taken your valuables into the ocean? Share your experiences and thoughts below.