ICICI Lombard General Insurance (NSE:ICICIGI) Will Pay A Larger Dividend Than Last Year At ₹5.00

The board of ICICI Lombard General Insurance Company Limited (NSE:ICICIGI) has announced that it will be paying its dividend of ₹5.00 on the 3rd of September, an increased payment from last year's comparable dividend. This takes the dividend yield to 0.8%, which shareholders will be pleased with.

See our latest analysis for ICICI Lombard General Insurance

ICICI Lombard General Insurance's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, ICICI Lombard General Insurance's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 104.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 20% by next year, which is in a pretty sustainable range.

ICICI Lombard General Insurance's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 5 years was ₹1.50 in 2017, and the most recent fiscal year payment was ₹10.00. This means that it has been growing its distributions at 46% per annum over that time. ICICI Lombard General Insurance has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. ICICI Lombard General Insurance has seen EPS rising for the last five years, at 11% per annum. ICICI Lombard General Insurance definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like ICICI Lombard General Insurance's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 4 warning signs for ICICI Lombard General Insurance that investors should take into consideration. 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.