NetApp Inc (NTAP): A Deep Dive into its Dividend Performance and Sustainability
A comprehensive analysis of NetApp Inc's upcoming dividend, historical payments, yield, growth rate, and overall sustainability
NetApp Inc(NASDAQ:NTAP) recently announced a dividend of $0.5 per share, payable on 2023-10-25, with the ex-dividend date set for 2023-10-05. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's deep dive into NetApp Inc's dividend performance and assess its sustainability.
What Does NetApp Inc Do?
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NetApp Inc is a leading provider of enterprise data management and storage solutions. The company's segments include Hybrid Cloud and Public Cloud. It generates maximum revenue from the Hybrid Cloud segment. The Hybrid Cloud segment offers a portfolio of storage management and infrastructure solutions that help customers recast their traditional data centers with the power of cloud. This portfolio is designed to operate with public clouds to unlock the potential of hybrid, multi-cloud operations. Hybrid Cloud is composed of software, hardware, and related support, as well as professional and other services.
A Glimpse at NetApp Inc's Dividend History
NetApp Inc has maintained a consistent dividend payment record since 2013. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down NetApp Inc's Dividend Yield and Growth
As of today, NetApp Inc currently has a 12-month trailing dividend yield of 2.65% and a 12-month forward dividend yield of 2.65%. This suggests an expectation of same dividend payments over the next 12 months.
Over the past three years, NetApp Inc's annual dividend growth rate was 1.40%. Extended to a five-year horizon, this rate increased to 16.20% per year. Based on NetApp Inc's dividend yield and five-year growth rate, the 5-year yield on cost of NetApp Inc stock as of today is approximately 5.61%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-07-31, NetApp Inc's dividend payout ratio is 0.36.
NetApp Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks NetApp Inc's profitability 9 out of 10 as of 2023-07-31, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. NetApp Inc's growth rank of 9 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and NetApp Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. NetApp Inc's revenue has increased by approximately 7.60% per year on average, a rate that outperforms than approximately 59.37% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, NetApp Inc's earnings increased by approximately 18.00% per year on average, a rate that outperforms than approximately 57% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 43.90%, outperforms than approximately 91.21% of global competitors.
Next Steps
Given NetApp Inc's consistent dividend payments, impressive growth rate, low payout ratio, strong profitability, and robust growth metrics, it presents a compelling case for dividend-focused investors. The company's ability to sustain and grow dividends is underpinned by its robust fundamentals and growth trajectory. However, as with any investment, investors should continue to monitor these metrics closely to ensure the company's financial health remains strong.
GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article first appeared on GuruFocus.
