As we come to the end of December, it has been a quite a year in the stock market with “fear and greed” resulting in quite a volatile market. This has spooked most investors even though we are basically flat for the year. One bright spot has been Hawaiian Electric Industries (HE, NYSE, 52 week change $20.59 – $26.79), mostly due to its solid dividend giving investors a good overall return.

HE is currently paying an annual dividend of $1.24 per share, giving investors an annual yield of approximately 4.8 percent based on today’s stock market price. That’s pretty good compared to the US Treasury’s 10-year note yielding only 2 percent, and we all know what money markets are paying — next to nothing.

Although Treasuries and money market funds definitely are safer bets, HE is a utility that is financially strong and is sitting on approximately $283 million in cash and had cash flow over the last 12 months of $265 million. Yearly dividend payout at the current rate is about $120 million.

In respect to the share price, HE is indicating a forward price earnings ratio (P/E), based on analysts expectations, of about 15 compared to the industry, Electric Utilities, at 15.6. Analysts consensus is for earnings growth to continue after a weak 2010, with most posting a neutral rating on the shares. And for those of us that pay utility bills, we know full well that when fuel prices surge, it gets passed on to us. (Did you see the increase in last month’s billing?) Also, compare the share price change over the last 12 months, up 16 percent, to the S&P 500, up 2.27 percent in that same time period.

I wouldn’t go all in, but Hawaii’s economy continues to roll along, i.e. electrical usage, so these shares should be looked at as a core holding. There is one caveat in that the military is a big electric customer and if the anticipated defense cuts affect Hawaii, it could impact HE’s earnings in the future.

Side Note: Hoku’s shares have dropped to $0.60 per share from $0.80 since we wrote about them last week.