ITOCHU (TSE:8001) Has Announced That It Will Be Increasing Its Dividend To ¥100.00

ITOCHU Corporation (TSE:8001) will increase its dividend from last year's comparable payment on the 4th of December to ¥100.00. The payment will take the dividend yield to 2.8%, which is in line with the average for the industry.

See our latest analysis for ITOCHU

ITOCHU's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, ITOCHU'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.

The next year is set to see EPS grow by 7.0%. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

ITOCHU Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was ¥46.00, compared to the most recent full-year payment of ¥200.00. This means that it has been growing its distributions at 16% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

ITOCHU Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. ITOCHU has seen EPS rising for the last five years, at 9.7% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for ITOCHU's prospects of growing its dividend payments in the future.

ITOCHU Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for ITOCHU that investors need to be conscious of moving forward. Is ITOCHU 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.