NTT System (WSE:NTT) Will Pay A Smaller Dividend Than Last Year

NTT System S.A. (WSE:NTT) has announced it will be reducing its dividend payable on the 19th of December to PLN0.14, which is 6.7% lower than what investors received last year for the same period. The dividend yield of 1.4% is still a nice boost to shareholder returns, despite the cut.

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NTT System's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, NTT System's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 33.8% over the next 12 months. If the dividend continues on this path, the payout ratio could be 5.9% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for NTT System

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The most recent annual payment of PLN0.15 is about the same as the annual payment 10 years ago. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that NTT System has grown earnings per share at 34% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like NTT System's Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like NTT System does. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. For example, we've picked out 1 warning sign for NTT System that investors should know about before committing capital to this stock. Is NTT System 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.