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The board of Credit Corp Group Limited (ASX:CCP) has announced that it will be increasing its dividend by 113% on the 28th of March to A$0.32, up from last year's comparable payment of A$0.15. Even though the dividend went up, the yield is still quite low at only 2.4%.
View our latest analysis for Credit Corp Group
Credit Corp Group's Future Dividend Projections Appear Well Covered By Earnings
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Credit Corp Group was paying a whopping 259% as a dividend, but this only made up 35% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.
Over the next year, EPS is forecast to fall by 7.2%. If the dividend continues along recent trends, we estimate the payout ratio could be 39%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of A$0.40 in 2015 to the most recent total annual payment of A$0.38. Payments have been decreasing at a very slow pace in this time period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Credit Corp Group May Find It Hard To Grow The Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Credit Corp Group has only grown its earnings per share at 2.1% per annum over the past five years. While growth may be thin on the ground, Credit Corp Group could always pay out a higher proportion of earnings to increase shareholder returns.
Our Thoughts On Credit Corp Group's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Credit Corp Group is earning enough to cover the payments, the cash flows are lacking. 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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 7 analysts we track are forecasting for Credit Corp Group for free with public analyst estimates for the company. Is Credit Corp Group not quite the opportunity you were looking for? Why not check out our selection of top 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.