Credit Bureau Asia’s SGD0.02 Dividend: A Modest Payout with Sustainability Questions

Credit Bureau Asia (SGX: TCU) has reaffirmed its semi-annual dividend of SGD0.02 per share, maintaining an annual payout of SGD0.04 and a trailing twelve-month dividend yield of 3.05% as of late 2024. While the yield offers modest income potential, investors must weigh this against the company’s elevated payout ratios, short dividend history, and recent stock price volatility.

Dividend Sustainability: Cause for Caution

The dividend’s sustainability hinges on the company’s financial health. Despite a 32% free cash flow payout ratio—a manageable level—the dividend payout ratio based on earnings remains a concern. At 82% prior to the 2025 announcement, this ratio sits near a threshold that could strain earnings growth. Analysts project a 31.1% EPS growth for 2025, which could lower the payout ratio to 64% by year-end, improving long-term prospects. However, the dividend’s 4-year track record (since 2021) is short compared to established dividend payers, limiting reliability.

Yield and Market Dynamics

The 3.05% dividend yield is nearing its 2-year low, signaling potential market skepticism. This decline could reflect broader concerns about the company’s valuation or sector-specific risks. Meanwhile, the stock’s recent price swings—from a low of SGD1.23 on April 7, 2025, to a rebound to SGD1.34 by April 8—highlight sensitivity to technical indicators like moving averages.

Growth Prospects and Risks

Credit Bureau Asia has achieved 7% annual EPS growth over the past five years, but the high payout ratio leaves little room for dividend increases. The modest 4.1% CAGR in dividends since 2021 underscores this constraint. Additionally, the stock’s PE ratio of 27.35 (TTM) suggests investors are pricing in growth expectations, which must materialize to justify current valuations.

Key Takeaways for Investors

1. Income Seekers: The 3.05% yield may appeal to those prioritizing steady payouts, but the short dividend history and high payout ratio warrant caution.
2. Growth Investors: Focus on the company’s projected 31.1% EPS growth in 2025, which—if realized—could stabilize the payout ratio and support share price resilience.
3. Risk Factors: Monitor the dividend payout ratio’s trajectory and the stock’s sensitivity to macroeconomic conditions affecting credit demand.

Conclusion

Credit Bureau Asia’s SGD0.02 dividend offers a niche income play, but its sustainability remains uncertain. With a payout ratio near 80% and a short dividend history, investors should pair this stock with other, more established income generators. The rebound to SGD1.34 in early April 2025 hints at potential, but the yield’s decline to near 2-year lows and valuation multiples above historical averages suggest caution. For now, Credit Bureau Asia appears to be a hold—suitable for those willing to accept moderate income with elevated risk, but not a core holding for long-term growth.

Final Analysis: While the dividend remains intact, the 32% free cash flow coverage and projected EPS growth offer a glimmer of hope. However, without sustained earnings momentum, the 3.05% yield may not compensate for the risks.

Data as of April 8, 2025. Past performance does not guarantee future results.