Credit Bureau Asia Limited (SGX:TCU) Will Pay A S$0.02 Dividend In Three Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Credit Bureau Asia Limited (SGX:TCU) is about to trade ex-dividend in the next three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Credit Bureau Asia investors that purchase the stock on or after the 14th of August will not receive the dividend, which will be paid on the 29th of August.

The company's next dividend payment will be S$0.02 per share, and in the last 12 months, the company paid a total of S$0.04 per share. Based on the last year's worth of payments, Credit Bureau Asia has a trailing yield of 2.9% on the current stock price of S$1.38. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Its dividend payout ratio is 86% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 64% of its free cash flow as dividends, within the usual range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

See our latest analysis for Credit Bureau Asia

Click here to see how much of its profit Credit Bureau Asia paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Credit Bureau Asia, with earnings per share up 6.1% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Credit Bureau Asia has delivered an average of 4.1% per year annual increase in its dividend, based on the past four years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid Credit Bureau Asia? Earnings per share have been growing modestly and Credit Bureau Asia paid out a bit over half of its earnings and free cash flow last year. To summarise, Credit Bureau Asia looks okay on this analysis, although it doesn't appear a stand-out opportunity.

Want to learn more about Credit Bureau Asia's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.