Himax Technologies' (NASDAQ:HIMX) Dividend Will Be Reduced To $0.47
Himax Technologies, Inc. (NASDAQ:HIMX) is reducing its dividend from last year's comparable payment to $0.47 on the 12th of July. This means the annual payment is 6.3% of the current stock price, which is above the average for the industry.
Check out our latest analysis for Himax Technologies
Himax Technologies' Earnings Easily Cover The Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Himax Technologies was paying only paying out a fraction of earnings, but the payment was a massive 127% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.
Over the next year, EPS is forecast to expand by 17.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 60%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was $0.126 in 2013, and the most recent fiscal year payment was $0.48. This means that it has been growing its distributions at 14% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Himax Technologies has grown earnings per share at 41% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
In Summary
Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While Himax Technologies is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Himax Technologies that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
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