ICICI Bank's (NSE:ICICIBANK) Dividend Will Be Increased To ₹8.00

ICICI Bank Limited (NSE:ICICIBANK) will increase its dividend from last year's comparable payment on the 29th of September to ₹8.00. Although the dividend is now higher, the yield is only 0.8%, which is below the industry average.

View our latest analysis for ICICI Bank

ICICI Bank's Earnings Will Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Having distributed dividends for at least 10 years, ICICI Bank has a long history of paying out a part of its earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 16% also shows that ICICI Bank is able to comfortably pay dividends.

Looking forward, EPS is forecast to rise by 42.2% over the next 3 years. The future payout ratio could be 16% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the dividend has gone from ₹3.64 total annually to ₹8.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.2% a year over that time. 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

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. ICICI Bank has impressed us by growing EPS at 32% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for ICICI Bank you should be aware of, and 1 of them is potentially serious. 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.