NTT DATA Group (TSE:9613) Will Pay A Larger Dividend Than Last Year At ¥12.50

NTT DATA Group Corporation (TSE:9613) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of December to ¥12.50. Based on this payment, the dividend yield for the company will be 1.3%, which is fairly typical for the industry.

See our latest analysis for NTT DATA Group

NTT DATA Group's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, NTT DATA Group was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 12.9%. 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

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥12.00 in 2014 to the most recent total annual payment of ¥25.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.6% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

NTT DATA Group Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. NTT DATA Group has seen EPS rising for the last five years, at 6.3% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for NTT DATA Group (1 is significant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.