ICICI Bank (NSE:ICICIBANK) Will Pay A Larger Dividend Than Last Year At ₹5.00

ICICI Bank Limited (NSE:ICICIBANK) has announced that it will be increasing its dividend from last year's comparable payment on the 29th of September to ₹5.00. Although the dividend is now higher, the yield is only 0.6%, which is below the industry average.

See our latest analysis for ICICI Bank

ICICI Bank's Payment Expected To Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end.

ICICI Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While past data isn't a guarantee for the future, ICICI Bank's latest earnings report puts its payout ratio at 13%, showing that the company can pay out its dividends comfortably.

If the trend of the last few years continues, EPS will grow by 56.1% over the next 12 months. Estimates from analysts also put the future payout ratio of the company at 18% in the next 3 years, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ₹3.00 in 2012 to the most recent total annual payment of ₹5.00. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that ICICI Bank has grown earnings per share at 56% per year over the past three years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

ICICI Bank Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that ICICI Bank is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for ICICI Bank that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.