It looks like Credit Bureau Asia Limited (SGX:TCU) is about to go ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Credit Bureau Asia's shares before the 18th of August in order to receive the dividend, which the company will pay on the 2nd of September.

The company's next dividend payment will be S$0.017 per share, and in the last 12 months, the company paid a total of S$0.034 per share. Based on the last year's worth of payments, Credit Bureau Asia has a trailing yield of 3.3% on the current stock price of SGD1.02. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Credit Bureau Asia has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Credit Bureau Asia

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Last year, Credit Bureau Asia paid out 99% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. 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. The company paid out 95% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

Cash is slightly more important than profit from a dividend perspective, but given Credit Bureau Asia's payouts were not well covered by either earnings or cash flow, we would be concerned about the sustainability of this dividend.

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 earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Credit Bureau Asia earnings per share are up 5.9% per annum over the last five years. Earnings per share have been growing comfortably, although unfortunately the company is paying out more of its profits than we're comfortable with over the long term.

Credit Bureau Asia also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

Unfortunately Credit Bureau Asia has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

Is Credit Bureau Asia an attractive dividend stock, or better left on the shelf? The dividends are not well covered by either income or free cash flow, although at least earnings per share are slowly increasing. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Credit Bureau Asia. To help with this, we've discovered 1 warning sign for Credit Bureau Asia that you should be aware of before investing in their shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.