Four days remain until NTT System SA (WSE: NTT) negotiates the ex-dividend

Some investors rely on dividends to grow their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that NTT System SA (WSE: NTT) is set to be ex-dividend in just 4 days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders must be on the books of the company to receive a dividend. The ex-dividend date is important because every time a stock is bought or sold, the transaction takes at least two business days to settle. Therefore, if you buy NTT System shares on or after September 27, you will not be eligible to receive the dividend, when it is paid on October 19.

The next dividend payment of the company will be 0.15 z per share, compared to last year when the company paid a total of 0.15 z to shareholders. Last year’s total dividend payouts show that NTT System has a rolling 2.6% return on the current share price of PLN 5.88. Dividends are an important source of income for many shareholders, but the health of the business is critical to sustaining those dividends. You have to see if the dividend is covered by profits and if it increases.

See our latest review for NTT System

Dividends are usually paid out of the company’s profits, so if a company pays more than it earned, its dividend is usually at risk of being reduced. NTT System pays only 18% of its profit after tax, which is comfortably low and leaves a lot of leeway in the event of adverse events. Having said that, even very profitable companies can sometimes not generate enough cash to pay the dividend, which is why we always need to check if the dividend is covered by the cash flow. NTT System paid a dividend despite negative free cash flow last year. It’s usually a bad combination and – if it was more than a one-off – not sustainable.

Click here to see how much of its profit NTT System has paid in the past 12 months.

Historic WSE dividend: NTT September 22, 2021

Have profits and dividends increased?

Companies with consistently rising earnings per share usually make the best dividend-paying stocks because they generally find it easier to raise dividends per share. If profits fall enough, the company could be forced to cut its dividend. Luckily for readers, NTT System’s earnings per share have grown 14% per year over the past five years.

Another key way to measure a company’s dividend outlook is to measure its historical rate of dividend growth. Over the past nine years, NTT System has increased its dividend to around 2.5% per year on average. Earnings per share have grown much faster than dividends, potentially because NTT System is withholding more of its earnings to grow the business.

Last takeaways

Does NTT System have what it takes to maintain its dividend payments? We appreciate that NTT System has managed to grow its earnings per share at a good pace and to reinvest most of its earnings back into the business. However, we note with some concern the high cash flow payout ratio. All in all, we’re not particularly excited about NTT System from a dividend standpoint.

With this in mind, an essential part of in-depth stock research is being aware of the risks stocks currently face. To help you, we have discovered 2 warning signs for the NTT system which you should know before investing in their stocks.

If you are in the dividend-paying stock market, we recommend that you check out our list of the highest dividend-paying stocks with a yield above 2% and a future dividend.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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