Sony(NYSE: SONY) has attracted notice lately for its upcoming stock split. It's cleaving its U.S.-listed American despositary receipts (ADRs) at a rate of 5-for-1, which will kick in on Oct. 1. Investors get excited about stocks when they announce splits, but they buy shares of companies like Sony for many other reasons. Might the Japanese tech sector mainstay's dividend be one of them?
Rising from a modest base
Probably not.
In contrast to most U.S. stocks, which pay dividends each quarter, Sony doles out its payout on a semi-annual basis. For the fiscal year ended Mar. 31, Sony paid 40 Japanese yen ($0.28) and 45 yen ($0.31) per each of the company's ADRs in its two payments for the year, for a fairly thin dividend yield of 0.7%.
That's hardly sufficient to get any income investor out of bed in the morning, but Sony management has promised to be more generous. When it announced its fourth-quarter and fiscal 2023 results in mid-May, the company said it would boost its payout ratio considerably, from 32% to 40% by fiscal 2026. It did not specify any exact per-share amounts for those future distributions.
Another shareholder-pleasing measure it pledged to enact was a large share repurchase program. Sony said it would commit up to 250 billion yen ($1.7 billion) to such an initiative, although it didn't provide many further details.
Speaking of modest...
Even if it fulfills its promise to be an assertive dividend raiser, Sony's working from a fairly low basis. Its yield probably won't increase to levels that are much more compelling.
So if it's not offering a particularly generous shareholder disbursement, perhaps its fundamentals are in for a tasty boost? Alas, it sees sales of its fading PlayStation 5 dropping notably this fiscal year, and these days it isn't a clear world-beater in any other major product category. Its five-year PEG ratio is nearly 4, which is pricey for a sluggish incumbent. So for me, Sony stock is not a buy, either for its dividend or on the basis of potential growth.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
