NTT (TSE:9432) Is Increasing Its Dividend To ¥2.65

NTT, Inc. (TSE:9432) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of December to ¥2.65. This takes the dividend yield to 3.5%, which shareholders will be pleased with.

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NTT's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, NTT's dividend was only 39% of earnings, however it was paying out 189% of free 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.

Over the next year, EPS is forecast to expand by 7.1%. If the dividend continues on this path, the payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for NTT

NTT 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 ¥1.80 in 2015, and the most recent fiscal year payment was ¥5.30. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

We Could See NTT's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. NTT has seen EPS rising for the last five years, at 5.5% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for NTT's prospects of growing its dividend payments in the future.

Our Thoughts On NTT's Dividend

Overall, we always like to see the dividend being raised, but we don't think NTT will make a great income stock. While NTT is earning enough to cover the payments, the cash flows are lacking. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for NTT that you should be aware of before investing. Is NTT 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.