NTT DATA Group (TSE:9613) Is Increasing Its Dividend To ¥12.50

NTT DATA Group Corporation's (TSE:9613) dividend will be increasing from last year's payment of the same period to ¥12.50 on 2nd of December. Despite this raise, the dividend yield of 1.0% is only a modest boost to shareholder returns.

See our latest analysis for NTT DATA Group

NTT DATA Group's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, NTT DATA Group was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 11.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.

NTT DATA Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥12.00 in 2014, and the most recent fiscal year payment was ¥25.00. This implies that the company grew its distributions at a yearly rate of about 7.6% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

NTT DATA Group Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. NTT DATA Group has impressed us by growing EPS at 7.4% per year over the past five years. NTT DATA Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On NTT DATA Group's Dividend

In summary, while it's always good to see the dividend being raised, we don't think NTT DATA Group's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

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. For example, we've picked out 1 warning sign for NTT DATA Group that investors should know about before committing capital to this stock. Is NTT DATA Group 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.

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