You may have heard of Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) before. Most likely, you heard about it through the research of Mark Gomes, who produced evidence linking the Taiwanese semiconductor company to Google Inc (NASDAQ:GOOG)‘s Glass project. While it hasn’t been confirmed by either company, there is a mounting pile of evidence that it is, in fact, Himax Technologies, Inc. (ADR) (NASDAQ:HIMX)’s LCOS Microdisplay that provides the backbone of the Google glasses.
But, quite frankly, I’m getting pretty tired of the Google-Himax chatter and the way that retail investors are treating this company as if it lives and dies by the success of Google’s Glass. Shares have risen on Google technology presentations, lowered on news of Google glasses being banned at various establishments, and generally trodden along with Google Inc (NASDAQ:GOOG) itself on good days and bad days alike.
But, at the heart of the Himax story, what we have is a profitable company that, due to unfavorable (or favorable, depending on whether you’re a buyer or a seller right now) market conditions, is horribly undervalued. I’m writing this article to present why Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) deserves to be considered for your long-term portfolio.
A dividend that matches great profitability
Last year, Himax paid its annual dividend of $0.06 per share. Looking at the share price today, that might seem minuscule. But, at the time, that was about a 4% distribution to the stock’s share price that was, at the time, under $2. The small-cap company was coming off of a low year in terms of net income, yet still committed to rewarding shareholders.
Fast forward to the present, and Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) just raised its dividend to $0.25 per share — providing investors with a nearly 5% dividend. True to the company’s word, it has remained consistent with its dividends; in fact, the next distribution (coming in July) will mark the seventh year in a row that Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) has shared its profits with investors. One of my favorite parts about the dividend announcement was the following quote from CEO Jordan Wu:
Due to significant profitability improvement in 2012, Himax increases cash dividend from 6.3 cents per ADS in 2012 to 25 cents per ADS in 2013. The high payout ratio demonstrates our continued support of our shareholder base and long standing profitability.
Note the part about long standing profitability. Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) is a money maker, not a speculative play. It has tripled its EPS quarter-over-quarter and some estimations include a further 50% increase next year. While lots of investors are drawn to companies that are losing money because they show the greatest potential for a large turnaround, we should all remember Peter Lynch admitting that he was 0-25 on companies with no revenue and a “great story.”
Sound investing involves finding great companies that are undervalued, not hitting home runs by trying to predict the next big thing every time, which leads us to our next point.