NetApp (NASDAQ:NTAP) Is Due To Pay A Dividend Of $0.50

NetApp, Inc. (NASDAQ:NTAP) has announced that it will pay a dividend of $0.50 per share on the 26th of July. This makes the dividend yield 2.8%, which will augment investor returns quite nicely.

See our latest analysis for NetApp

NetApp's Payment Has 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, NetApp's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 14.2% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 46%, which we are pretty comfortable with and we think is feasible on an earnings basis.

NetApp Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.60 in 2013 to the most recent total annual payment of $2.00. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that NetApp has been growing its earnings per share at 69% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

NetApp Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. 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. 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 NetApp that investors should know about before committing capital to this stock. Is NetApp 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.