Credit Bureau Asia Limited (SGX:TCU) has announced that it will pay a dividend of SGD0.02 per share on the 30th of August. This makes the dividend yield about the same as the industry average at 4.4%.

View our latest analysis for Credit Bureau Asia

Credit Bureau Asia's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Credit Bureau Asia's dividend made up quite a large proportion of earnings but only 35% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 14.7% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 72% which brings it into quite a comfortable range.

Credit Bureau Asia Doesn't Have A Long Payment History

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 2021, the annual payment back then was SGD0.034, compared to the most recent full-year payment of SGD0.04. This means that it has been growing its distributions at 5.6% per annum over that time. Credit Bureau Asia has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

We Could See Credit Bureau Asia's Dividend Growing

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 6.5% per year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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 be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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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