ICICI Securities (NSE:ISEC) Is Paying Out Less In Dividends Than Last Year

ICICI Securities Limited (NSE:ISEC) is reducing its dividend from last year's comparable payment to ₹12.75 on the 25th of September. The dividend yield of 4.8% is still a nice boost to shareholder returns, despite the cut.

Check out our latest analysis for ICICI Securities

ICICI Securities' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, ICICI Securities' earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

EPS is set to fall by 1.3% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could reach 76%, which is definitely on the higher side.

ICICI Securities' Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. The dividend has gone from an annual total of ₹7.80 in 2018 to the most recent total annual payment of ₹24.00. This works out to be a compound annual growth rate (CAGR) of approximately 32% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

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 Securities has impressed us by growing EPS at 29% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that ICICI Securities could prove to be a strong dividend payer.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While ICICI Securities is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for ICICI Securities (1 is concerning!) that you should be aware of before investing. 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.