Himax Technologies (NASDAQ:HIMX) Is Increasing Its Dividend To $0.73

The board of Himax Technologies, Inc. (NASDAQ:HIMX) has announced that it will be paying its dividend of $0.73 on the 11th of July, an increased payment from last year's comparable dividend. This will take the annual payment to 4.2% of the stock price, which is above what most companies in the industry pay.

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Himax Technologies' Projections Indicate Future Payments May Be Unsustainable

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last payment made up 81% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Earnings per share is forecast to rise by 14.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 139%, which probably can't continue without putting some pressure on the balance sheet.

View our latest analysis for Himax Technologies

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was $0.27 in 2015, and the most recent fiscal year payment was $0.37. This implies that the company grew its distributions at a yearly rate of about 3.2% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. In the last five years, Himax Technologies' earnings per share has shrunk at approximately 6.1% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Himax Technologies' Dividend

Overall, we always like to see the dividend being raised, but we don't think Himax Technologies will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Himax Technologies that investors should take into consideration. Is Himax Technologies not quite the opportunity you were looking for? Why not check out our selection of top 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.