Credit Bureau Asia Limited (SGX:TCU) has announced that it will pay a dividend of SGD0.017 per share on the 2nd of September. This means the annual payment is 3.3% of the current stock price, which is above the average for the industry.
Credit Bureau Asia's Payment Has Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 99% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 36%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.
EPS is set to grow by 22.3% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 81% - on the higher side, but we wouldn't necessarily say this is unsustainable.
Credit Bureau Asia Doesn't Have A Long Payment History
The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.
There Isn't Much Room To Grow The Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Credit Bureau Asia has impressed us by growing EPS at 5.9% per year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.
Our Thoughts On Credit Bureau Asia's Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Credit Bureau Asia that investors need to be conscious of moving forward. Is Credit Bureau Asia not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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