Hitachi (TSE:6501) Will Pay A Larger Dividend Than Last Year At ¥23.00

The board of Hitachi, Ltd. (TSE:6501) has announced that it will be paying its dividend of ¥23.00 on the 27th of November, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 1.1% is only a modest boost to shareholder returns.

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Hitachi's Future Dividend Projections Appear Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Hitachi's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 14.5% over the next year. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

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Hitachi Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ¥12.00 in 2015, and the most recent fiscal year payment was ¥44.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Hitachi has seen EPS rising for the last five years, at 28% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Hitachi's Dividend

Overall, a dividend increase is always good, and we think that Hitachi is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 15 analysts we track are forecasting for Hitachi for free with public analyst estimates for the company. Is Hitachi not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.