Key Highlights

  • Spectra Systems Corporation (LSE:SPSC) offers a Dividend Yield of 6.07%.
  • The annual dividend rose 17% to $0.136 per share for 2025 and was paid in July 2026.
  • Revenue increased 30.7% to $64.3 million, and adjusted EBITDA rose 82.9% to $27.3 million in 2025.
  • Growth was driven by a large Central Bank sensor contract, which is scheduled for completion in 2026.

Company Overview

Spectra Systems Corporation (LSE:SPSC) is an AIM-quoted technology company based in Providence, Rhode Island. It specialises in machine-readable, high-speed banknote authentication, security printing through its Cartor subsidiary, polymer banknote substrate, Brand protection technologies and gaming security software.

The shares offer a dividend yield of 6.07%. Spectra pays a single annual dividend in US dollars, which is converted to sterling for UK shareholders.

Dividend Growth Record

Spectra has paid a dividend every year for several years and has generally increased it. The dividend for 2024 was $0.116 per share, paid in June 2025 at a total cost of about $5.6 million. For 2025, the board declared an annual dividend of $0.136 per share, an increase of 17%, which was paid in July 2026. In sterling terms, the payment was roughly 10.1 pence per share, compared with about 8.6 pence the year before.

The increase reflects record profitability and the board's confidence in the business.

Record Results

The 2025 results were the best in the company's history in profit terms. Revenue rose 30.7% to $64.3 million from $49.2 million. Adjusted EBITDA increased 82.9% to $27.3 million, adjusted profit before tax and Amortisation rose 109.4% to $25.2 million, and pretax profit more than doubled to $26.8 million.

Chief executive Nabil Lawandy said execution of the sensor contract had delivered the highest profitability since the company was founded.

The Sensor Contract

The main driver of growth was a development and production contract with a central bank customer for banknote authentication sensors. In 2025, sensor production revenue of $22.0 million and related hardware sales of $7.3 million were recognised. The contract is scheduled for completion in 2026.

This creates an important question for dividend sustainability. Once the contract is complete, revenue and profit could fall unless new contracts of similar scale replace it. Management says it has a number of short-term and long-term prospects that should allow it to accelerate revenue and Earnings growth in coming years.

Payout Cover and Cash

At $0.136 per share, the dividend costs roughly $6.6 million a year. That is well covered by 2025 adjusted pretax profit of $25.2 million, implying cover of nearly four times. However, profit in 2025 was boosted by contract-specific revenue, so cover in future years depends on new business.

Cash management has been tight at times. At the half-year in 2025, unrestricted cash was $2.6 million, alongside restricted cash held in connection with the central bank customer and Debt of $3.7 million related to the Cartor acquisition, as the company pre-purchased sensor components. Restricted cash was $3.2 million at the end of 2025. The receipt of contract payments in 2026 should support liquidity.

Other Growth Areas

Beyond the sensor contract, Spectra's Fusion polymer substrate was selected by a major banknote printer, and the company validated a covert feature for passport control with leading forensic equipment suppliers. The gaming security software Business and Cartor security printing provide additional Recurring Revenue streams. Diversification across these activities reduces dependence on a single contract over time. Central banks typically upgrade banknote security in long cycles, and Spectra's established relationships give it an advantage when new authentication programmes are tendered. The company has also highlighted opportunities in brand protection and document security, which could provide steadier revenue than one-off central bank projects. The share price rose sharply in April 2026, reaching about 160 pence, as investors reacted to the record results and the higher dividend.

Risks

Key risks include the lumpy nature of central bank contracts, delays in new orders, customer concentration and execution risk on new technologies. Currency movements between the dollar and sterling also affect the value of dividends received by UK investors. As a small company, Spectra relies on a limited management team, which adds key person risk.

Is the Dividend Sustainable?

The 2025 dividend at Spectra Systems Corporation (LSE:SPSC) was comfortably covered by record earnings. Whether the higher level can be maintained depends on securing new contracts once the current sensor programme completes in 2026. The 6.07% yield is attractive, but investors should watch for new order announcements before assuming further growth.