ICICI Securities' (NSE:ISEC) Shareholders Will Receive A Bigger Dividend Than Last Year

ICICI Securities Limited (NSE:ISEC) has announced that it will be increasing its dividend on the 18th of November to ₹11.25. This makes the dividend yield 3.2%, which is above the industry average.

Check out our latest analysis for ICICI Securities

ICICI Securities' Earnings Easily Cover the Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, ICICI Securities' earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

EPS is set to grow by 8.2% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 76%. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

ICICI Securities' Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2017, the first annual payment was ₹7.80, compared to the most recent full-year payment of ₹27.00. This means that it has been growing its distributions at 36% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

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 30% per year over the past five years. ICICI Securities is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Our Thoughts On ICICI Securities' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Securities has 4 warning signs (and 2 which shouldn't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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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