Hitachi's buy now, pay later strategy is working

Those "buy now, pay later" deals offered by furniture retailers, jewellers and electrical goods groups are financed by companies such as Hitachi Credit UK.

This company, two-thirds owned by the Japanese financing giant Hitachi Credit, reckons that any consumer slowdown might tempt stores to offer more of these sorts of incentives to customers.

There is also optimism at last on the business lending division, which was crippled by bad debts in 2001 and which has since had something of a rethink. It still offers vendor financing – a business equivalent of retail financing, where manufacturers offer "buy now, pay later" deals to encourage orders from customers – but is targeting much less risky propositions and has had a clear-out of its salesforce. The division should move back into profit in the coming year.

Hitachi also has a vehicle leasing division, Fleetlease, but this might hold back growth this year, since margins are under pressure in this intensely competitive market.

Hitachi is not an investment for everyone. It has been able to run up high debts because it has securitised some loans and is backed by its Japanese parent. And almost half its retail financing business comes from a single customer, DFS Furniture. But with a 7 per cent dividend yield and with the shares on a price-earnings multiple of less than 7, it is worth owning.