LIC Housing Finance (NSE:LICHSGFIN) Is Increasing Its Dividend To ₹8.50

LIC Housing Finance Limited's (NSE:LICHSGFIN) dividend will be increasing to ₹8.50 on 27th of October. This makes the dividend yield 2.1%, which is above the industry average.

See our latest analysis for LIC Housing Finance

LIC Housing Finance's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. LIC Housing Finance is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. 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 25.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 18%, which is in the range that makes us comfortable with the sustainability of the dividend.

LIC Housing Finance Has A Solid Track Record

The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was ₹3.50 in 2011, and the most recent fiscal year payment was ₹8.50. This implies that the company grew its distributions at a yearly rate of about 9.3% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

LIC Housing Finance May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 4.4% per annum over the last five years, which admittedly is a bit slow. If LIC Housing Finance is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

Overall, we always like to see the dividend being raised, but we don't think LIC Housing Finance will make a great income stock. While LIC Housing Finance is earning enough to cover the payments, the cash flows are lacking. We don't think LIC Housing Finance is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for LIC Housing Finance that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.

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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.
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