Nippon Telegraph and Telephone (TSE:9432) Will Pay A Dividend Of ¥2.60

Nippon Telegraph and Telephone Corporation (TSE:9432) has announced that it will pay a dividend of ¥2.60 per share on the 18th of December. This makes the dividend yield 3.6%, which is above the industry average.

View our latest analysis for Nippon Telegraph and Telephone

Nippon Telegraph and Telephone's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Nippon Telegraph and Telephone was paying only paying out a fraction of earnings, but the payment was a massive 379% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share is forecast to rise by 5.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.

Nippon Telegraph and Telephone Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥1.60 in 2014 to the most recent total annual payment of ¥5.20. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Nippon Telegraph and Telephone has grown earnings per share at 9.8% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Nippon Telegraph and Telephone's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Nippon Telegraph and Telephone that investors should know about before committing capital to this stock. Is Nippon Telegraph and Telephone 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.