Board of Directors NTT DATA Group Corporation (TSE:9613) announced that it will pay a dividend of 12.50 yen on December 2nd, an increase from the equivalent dividend paid last year. Based on this payment, the company’s dividend yield will be 1.2%, which is standard in the industry.
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NTT Data Group’s profits easily cover the dividend
We want to see dividends stable over the long term, and it’s important to check whether they’re sustainable. Based on the last dividend, NTT DATA Group was making enough profits to cover the dividend, but it did not have positive free cash flow. Generally, the company prioritizes cash flow over profits, so we would be cautious about relying on the sustainability of this dividend.
Looking ahead, earnings per share are expected to grow by 12.9% over the next year. If the dividend continues along recent trends, we forecast the payout ratio to be 25%, which is within our comfort zone about the sustainability of the dividend.
The NTT DATA Group boasts a solid track record
The company has paid a stable dividend over the years. Since 2014, the annual dividend at that time was ¥12.00, and the most recent annual dividend was ¥25.00. This means that the company has increased its dividend at a rate of approximately 7.6% per year over this period. Dividends have grown at a reasonable rate over this period, and the dividend has not been significantly cut over the long term, which we believe is an attractive combination that should greatly enhance shareholder returns.
NTT Data Group’s dividends could increase
Based on the company’s dividend history, some investors may be eager to buy the company’s shares. NTT Data Group has grown its EPS at 6.3% per year over the past five years. With its earnings on an upward trend and a low payout ratio, NTT Data Group certainly has the potential to increase its dividend in the future.
In summary
In summary, while it’s good to see dividends increasing, I don’t think NTT Data Group’s payments are solid. With a lack of cash flow, I’m not sure the company can continue to pay its dividends. Overall, I don’t think this company has the potential to be a great income stock.
Market movements have proven how a consistent dividend policy is valued compared to an unpredictable one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should be aware of when evaluating a company. As examples, we have identified: One warning sign for NTT Data Group Here’s what you should know before you invest. If you’re a dividend investor, A carefully selected list of high dividend stocks.
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This article by Simply Wall St is general in nature. We use only unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives, or your financial situation. We seek to provide long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
