NTT DATA Group's (TSE:9613) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of NTT DATA Group Corporation (TSE:9613) has announced that it will be paying its dividend of ¥12.50 on the 2nd of December, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 1.2%, which is fairly typical for the industry.

View 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. 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.

Looking forward, earnings per share is forecast to rise by 12.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which is in the range that makes us comfortable with the sustainability of the dividend.

NTT DATA Group Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was ¥12.00, compared to the most recent full-year payment of ¥25.00. This implies that the company grew its distributions at a yearly rate of about 7.6% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

We Could See NTT DATA Group's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. NTT DATA Group has seen EPS rising for the last five years, at 6.3% per annum. NTT DATA Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

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. Overall, we don't think this company has the makings of a good income stock.

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. As an example, we've identified 1 warning sign for NTT DATA Group that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.