NTT DATA Group's (TSE:9613) Dividend Will Be ¥11.50

NTT DATA Group Corporation (TSE:9613) will pay a dividend of ¥11.50 on the 21st of June. This means the annual payment will be 0.9% of the current stock price, which is lower than the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that NTT DATA Group's stock price has increased by 30% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for NTT DATA Group

NTT DATA Group's Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, NTT DATA Group's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise by 72.5% over the next year. If the dividend continues on this path, the payout ratio could be 16% by next year, which we think can be pretty sustainable going forward.

NTT DATA Group Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ¥12.00 in 2014 to the most recent total annual payment of ¥23.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.7% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

We Could See NTT DATA Group's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that NTT DATA Group has been growing its earnings per share at 9.4% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for NTT DATA Group's prospects of growing its dividend payments in the future.

Our Thoughts On NTT DATA Group's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While NTT DATA Group is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 2 warning signs 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.