Credit Bureau Asia (SGX:TCU) Has Announced A Dividend Of SGD0.02

The board of Credit Bureau Asia Limited (SGX:TCU) has announced that it will pay a dividend on the 30th of May, with investors receiving SGD0.02 per share. Including this payment, the dividend yield on the stock will be 3.0%, which is a modest boost for shareholders' returns.

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Credit Bureau Asia's Payment Could Potentially Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before this announcement, Credit Bureau Asia was paying out 82% of earnings, but a comparatively small 32% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

The next year is set to see EPS grow by 31.1%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 64% which would be quite comfortable going to take the dividend forward.

See our latest analysis for Credit Bureau Asia

Credit Bureau Asia Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. Since 2021, the annual payment back then was SGD0.034, compared to the most recent full-year payment of SGD0.04. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Credit Bureau Asia has grown earnings per share at 7.0% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Credit Bureau Asia's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Are management backing themselves to deliver performance? Check their shareholdings in Credit Bureau Asia in our latest insider ownership analysis. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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