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Life Insurance Corporation of India (NSE:LICI) Is Increasing Its Dividend To ₹12.00

Simply Wall St · 06/03 01:16

The board of Life Insurance Corporation of India (NSE:LICI) has announced that it will be paying its dividend of ₹12.00 on the 25th of September, an increased payment from last year's comparable dividend. This makes the dividend yield 1.2%, which is above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Life Insurance Corporation of India's stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Life Insurance Corporation of India's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Life Insurance Corporation of India 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 7.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 13% by next year, which is in a pretty sustainable range.

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NSEI:LICI Historic Dividend June 3rd 2025

Check out our latest analysis for Life Insurance Corporation of India

Life Insurance Corporation of India Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2022, the dividend has gone from ₹1.50 total annually to ₹12.00. This means that it has been growing its distributions at 100% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Life Insurance Corporation of India has grown earnings per share at 16% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Life Insurance Corporation of India's 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. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for Life Insurance Corporation of India (2 are a bit concerning!) that you should be aware of before investing. Is Life Insurance Corporation of India not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.