ICICI Bank's (NSE:ICICIBANK) Shareholders Will Receive A Bigger Dividend Than Last Year

ICICI Bank Limited (NSE:ICICIBANK) has announced that it will be increasing its dividend on the 29th of September to ₹5.00. Even though the dividend went up, the yield is still quite low at only 0.7%.

See our latest analysis for ICICI Bank

ICICI Bank's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, ICICI Bank was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

The next year is set to see EPS grow by 7.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 13%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the dividend has gone from ₹3.00 to ₹5.00. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. ICICI Bank has impressed us by growing EPS at 18% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for ICICI Bank's prospects of growing its dividend payments in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think ICICI Bank will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think ICICI Bank is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, ICICI Bank has 2 warning signs (and 1 which is concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.