Himax Technologies' (NASDAQ:HIMX) Upcoming Dividend Will Be Larger Than Last Year's

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 4.4% of the stock price, which is above what most companies in the industry pay.

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Estimates Indicate Himax Technologies' Could Struggle to Maintain Dividend Payments In The Future

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment made up 81% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

The next 12 months is set to see EPS grow by 14.8%. 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.

Check out our latest analysis for Himax Technologies

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of $0.27 in 2015 to the most recent total annual payment of $0.37. This implies that the company grew its distributions at a yearly rate of about 3.2% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, Himax Technologies' earnings per share has shrunk at approximately 6.1% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On Himax Technologies' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Himax Technologies that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.