AR / VR (augmented reality and virtual reality) component supplier Himax Technologies, Inc. (NASDAQ: HIMX) declared an annual dividend for the fiscal year of 2016. The announcement likely caught bears off guard. Himax, which is doubling down its efforts in the AR/VR market, is raising its operating costs to pivot its business. The higher costs implied the company would pay a lower dividend or none at all.
Himax is paying a dividend of $0.24 per ADS for shareholders of record as of July 31, 2017. CEO Jordan Wu said:
"This year's dividend represents a payout ratio of 81.4% based on our fiscal-year 2016 profit. The high payout ratio demonstrates our continued support of our shareholder base and strong confidence in the outlook for 2017 and beyond. As reported in the last few earnings calls, we are enlarging our WLO capacity within the current headquarters to meet certain anchor customer's strong demand starting 2017.”
The dividend is an 85% increase over last year’s yield and gives investors the confidence that management is maximizing shareholder returns without holding back on its investment in the company’s future. Despite the higher capital expenditures related to the expansion and inventory build-up, HIMX is confident in its cash flow generation from the WLO business. The LCoS also has potential sales growth as customers ramp up AR or VR devices.
Note that to get the dividend, investors must buy the stock on July 26, since July 31 is the settlement date.
Takeaway
Facebook (NASDAQ: FB) is building Oculus while Microsoft (NASDAQ: MSFT) develops the Hololens. Though Google (NASDAQ: GOOG) is updating Google Glass, it is not yet known if the company will try to push the AR product to the consumer space. If it does, HIMX will benefit.
