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Have you been keeping an eye on ICICI Prudential Life Insurance Company Limited’s (NSE:ICICIPRULI) upcoming dividend of ₹1.60 per share payable on the 22 November 2018? Then you only have 4 days left before the stock starts trading ex-dividend on the 01 November 2018. Is this future income a persuasive enough catalyst for investors to think about ICICI Prudential Life Insurance as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
See our latest analysis for ICICI Prudential Life Insurance
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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Does it pay an annual yield higher than 75% of dividend payers?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has dividend per share risen in the past couple of years?
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Is its earnings sufficient to payout dividend at the current rate?
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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does ICICI Prudential Life Insurance fit our criteria?
The company currently pays out 37% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 39%, leading to a dividend yield of 1.5%. In addition to this, EPS is forecasted to fall to ₹11.52 in the upcoming year.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view ICICI Prudential Life Insurance as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, ICICI Prudential Life Insurance has a yield of 1.5%, which is high for Insurance stocks but still below the market’s top dividend payers.
Next Steps:
Taking all the above into account, ICICI Prudential Life Insurance is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three relevant factors you should further research: