ICICI Prudential Life Insurance (NSE:ICICIPRULI) Is Increasing Its Dividend To ₹0.85

ICICI Prudential Life Insurance Company Limited's (NSE:ICICIPRULI) dividend will be increasing from last year's payment of the same period to ₹0.85 on 27th of July. Despite this raise, the dividend yield of 0.1% is only a modest boost to shareholder returns.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

ICICI Prudential Life Insurance's Future Dividend Projections Appear Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, ICICI Prudential Life Insurance's earnings easily covered the dividend, but free cash flows were negative. 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.

The next year is set to see EPS grow by 41.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 6.0%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for ICICI Prudential Life Insurance

ICICI Prudential Life Insurance's Dividend Has Lacked Consistency

ICICI Prudential Life Insurance has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of ₹2.20 in 2016 to the most recent total annual payment of ₹0.85. This works out to a decline of approximately 61% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

ICICI Prudential Life Insurance May Find It Hard To Grow The Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Unfortunately, ICICI Prudential Life Insurance's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think ICICI Prudential Life Insurance will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for ICICI Prudential Life Insurance that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.