Credit Bureau Asia Limited (SGX:TCU) announced a dividend of SGD0.02 per share to be paid on August 30, putting its dividend yield in line with the industry average of 4.4%.
View our latest analysis for Credit Bureau Asia
Credit Bureau Asia's profits easily cover dividends
Dividend yields are less impressive unless they can be sustained over the long term. Prior to this announcement, Credit Bureau Asia's dividends were a fairly large proportion of its profits, but only 35% of its free cash flow, leaving plenty of cash to reinvest in the business.
Looking ahead, earnings per share are expected to grow 14.7% over the next year. Assuming the dividend continues in line with recent trends, the dividend payout ratio is projected to be 72%, which puts it in a fairly comfortable range.
Historical Dividend
Credit Bureau Asia does not have a long payment history
Looking back, the dividends have been stable, but the company hasn't been paying dividends for that long, so we can't be sure the dividends will remain stable through all economic environments. Since 2021, the annual payment at that time was SGD0.034, while the most recent annual payment was SGD0.04. This means that the company has grown its distribution at 5.6% per year over this period. Credit Bureau Asia has grown its dividends at a respectable rate, and the payments have been stable. However, with a very short payment history, there is no evidence yet that the dividends can be sustained through a full economic cycle.
Credit Bureau Asia's dividend could increase
Investors who have held the company's shares over the past few years will be happy with the dividend income they have received. Credit Bureau Asia has impressed us by growing its EPS at 6.5% per year over the past five years. The company has been able to grow its earnings at a respectable rate recently, but with a high payout ratio, the prospects for dividend growth do not seem promising.
In summary
Overall, even with the current hike in the dividend, this stock probably isn't going to be a huge income generator. The company generates enough cash that it could potentially maintain the dividend for a while, but its track record hasn't been great. I'd be a bit wary of relying on this stock primarily for dividend income.
Market movements are proof of how a consistent dividend policy can be highly valued compared to a more unpredictable one. At the same time, there are other factors our readers should be aware of before pouring capital into a stock. Taking the discussion a little further, we've identified 1 warning sign for Credit Bureau Asia that investors should be aware of going forward. Is Credit Bureau Asia not the opportunity you've been looking for? Why not check out our selection of the best dividend stocks .
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This article by Simply Wall St is of general nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell a stock, and does not take into account your objectives or financial situation. We aim to provide long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned herein.
