NTT System's (WSE:NTT) Dividend Is Being Reduced To PLN0.14

The board of NTT System S.A. (WSE:NTT) has announced it will be reducing its dividend by 6.7% from last year's payment of PLN0.15 on the 19th of December, with shareholders receiving PLN0.14. This means the annual payment is 1.4% of the current stock price, which is above the average for the industry.

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NTT System's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, NTT System's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 33.8% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 5.9%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

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. It's encouraging to see that NTT System has been growing its earnings per share at 34% a 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. All of these factors considered, we think this has solid potential as a dividend stock.

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 instance, we've picked out 1 warning sign for NTT System that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.