Sony ( SONY -0.04% ) has been gaining attention recently for its an imminent division of company shares It is splitting its American depositary receipts (ADRs) listed in the U.S. at a ratio of 5-for-1, effective from October 1. Investors tend to show enthusiasm when companies declare stock splits, but they invest in companies like Sony for various other reasons as well. Could the dividend offered by this prominent Japanese technology company be one of those reasons?
Emerging from a humble beginning
Probably not.
Unlike the majority of U.S. stocks that distribute dividends every quarter, Sony pays its dividends twice a year. Sony paid 40 Japanese yen ($0.28) and 45 yen ($0.31) per American Depository Receipt (ADR) in its two payments for the fiscal year ending on March 31, resulting in a relatively modest dividend. yield of 0.7%.
The current increase in dividends announced by Sony’s management during the release of its financial results for the fourth quarter and fiscal 2023 in mid-May is not particularly significant enough to excite income investors. However, the company has pledged to be more generous by significantly raising its payout ratio from 32% to 40% by fiscal 2026. Sony did not provide specific details regarding the per-share amounts for these upcoming dividend payments.
Another action aimed at pleasing shareholders that Sony promised to take was a significant program to buy back shares. Sony announced that it would allocate up to 250 billion yen ($1.7 billion) for this program, but did not offer many specifics.
When it comes to being humble…
Sony may increase its dividends assertively as promised, but it is starting from a relatively low point. Therefore, its yield is not expected to rise significantly to become more attractive.
If the company is not providing a significant dividend to its shareholders, could it be that its underlying financial strengths are about to improve? Unfortunately, it is facing a significant decline in sales of its PlayStation 5 console this year, and it is not dominating other major product categories. With a five-year PEG ratio of close to 4, the stock is expensive for a slow-growing company. Therefore, in my opinion, investing in Sony stock is not recommended, whether for its dividend or growth prospects.
