NetApp (NASDAQ:NTAP) Has Announced That It Will Be Increasing Its Dividend To US$0.50

By
Simply Wall St
Published
September 11, 2021
NasdaqGS:NTAP
Source: Shutterstock

NetApp, Inc.'s (NASDAQ:NTAP) dividend will be increasing to US$0.50 on 27th of October. This takes the dividend yield to 2.1%, which shareholders will be pleased with.

View our latest analysis for NetApp

NetApp's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, NetApp was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 6.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 58% by next year, which is in a pretty sustainable range.

historic-dividend
NasdaqGS:NTAP Historic Dividend September 12th 2021

NetApp Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. Since 2013, the dividend has gone from US$0.60 to US$2.00. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. NetApp has impressed us by growing EPS at 28% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that NetApp could prove to be a strong dividend payer.

NetApp Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 NetApp that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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