Hitech (NSE:HITECHCORP) Has Affirmed Its Dividend Of ₹1.00

The board of Hitech Corporation Limited (NSE:HITECHCORP) has announced that it will pay a dividend of ₹1.00 per share on the 15th of August. This payment means the dividend yield will be 0.5%, which is below the average for the industry.

See our latest analysis for Hitech

Hitech's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Hitech's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 31.9% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 3.5% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the first annual payment was ₹1.60, compared to the most recent full-year payment of ₹1.00. Doing the maths, this is a decline of about 4.6% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see Hitech has been growing its earnings per share at 32% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Hitech Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 5 warning signs for Hitech that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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