LIC Housing Finance (NSE:LICHSGFIN) Has Announced That It Will Be Increasing Its Dividend To ₹9.00

LIC Housing Finance Limited's (NSE:LICHSGFIN) dividend will be increasing from last year's payment of the same period to ₹9.00 on 28th of September. This makes the dividend yield about the same as the industry average at 1.2%.

View our latest analysis for LIC Housing Finance

LIC Housing Finance's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, LIC Housing Finance 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.

Over the next year, EPS is forecast to expand by 22.5%. If the dividend continues on this path, the payout ratio could be 9.1% by next year, which we think can be pretty sustainable going forward.

LIC Housing Finance Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from ₹4.00 total annually to ₹9.00. This implies that the company grew its distributions at a yearly rate of about 8.4% 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.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that LIC Housing Finance has grown earnings per share at 12% per year over the past five years. LIC Housing Finance definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

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 the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for LIC Housing Finance (of which 1 is concerning!) 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.

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