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Japan-Update

NTT weighs seventh year of dividend hikes

Telecom group pressed to expand in growth areas

TOKYO -- Nippon Telegraph and Telephone is considering raising dividends for a seventh year running amid strong performance from core businesses but faces market pressure to show that it still has growth potential in such fields as information technology.

NTT President Hiroo Unoura says increasing per-share earnings is his company's paramount duty to investors.

The Japanese telecommunications giant expects to pay out 120 yen ($1.08) a share for the year ending March 31 and will likely add at least 10 yen more for the year through March 2018.

NTT aims to "continue raising dividends as much as possible," President Hiroo Unoura told The Nikkei. Factoring in a stock split, the company has raised dividend payouts each year since fiscal 2011. It sees net profit rising 4% to 770 billion yen this fiscal year.

The company first listed 30 years ago. Unoura acknowledged the milestone but sees the dividend hike as naturally stemming from gains in core operations, rather than a one-time commemorative payout. Mobile services arm NTT Docomo is performing well, and regional units NTT East and NTT West have cut costs through such means as maintaining network infrastructure.

Unoura said his management philosophy is that "increasing per-share earnings is [NTT's] duty to shareholders" as a pure holding company.

Earnings per share have climbed roughly 40% over the last three years, with a stock split factored in. A medium-term business plan due out in May will set a new goal for returns. "We'll invest the funds we've amassed in the most appropriate enterprises, like an investment fund that stays out of direct operations," Unoura said.

NTT stands out as a model amid a field of businesses not making efficient use of shareholders' equity, said Stephen Butt, chief investment officer of the U.K.'s Silchester International Investors. Others share his view.

But its stock price has fluctuated. While some appreciate NTT's approach to shareholder value, others see it as a "fully mature communications stock," in the words of a Japanese securities company.

The shares have climbed 10% since the Trump rally began Nov. 8, trailing the 25% gain racked up by Softbank Group on its announced $100 billion investment fund and aggressive acquisitions. NTT's rise is more in line with the 11% of the Nikkei Stock Average.

"Shifting the perception of NTT to that of a growth stock in the IT field is a challenge we face," Unoura said.

Voice and data transmission operations accounted for roughly 80% of sales in the fiscal year ended March 1986, before the company listed. They now provide just half. Growing in their place are such IT-related activities as support for migrating data to the cloud, as well as data center operations.

NTT is also laying the groundwork for overseas growth through such steps as subsidiary NTT Data purchasing an IT arm of Dell Technologies.

Including past cumulative dividends, NTT has finally topped its February 1987 issue price. Now the challenge will be balancing the burdens of growth and shareholder returns.

(Nikkei)

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