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Credit Corp Group Limited (ASX:CCP) has pleased shareholders over the past 10 years, by paying out dividends. The stock currently pays out a dividend yield of 3.1%, and has a market cap of AU$1.08b. Does Credit Corp Group tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Check out our latest analysis for Credit Corp Group
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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Does it pay an annual yield higher than 75% of dividend payers?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has it increased its dividend per share amount over the past?
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Does earnings amply cover its dividend payments?
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Will it be able to continue to payout at the current rate in the future?
How does Credit Corp Group fare?
Credit Corp Group has a trailing twelve-month payout ratio of 49.6%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 50.1%, leading to a dividend yield of 3.5%. Furthermore, EPS should increase to A$1.44.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of CCP it has increased its DPS from A$0.040 to A$0.72 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Credit Corp Group produces a yield of 3.1%, which is on the low-side for Consumer Finance stocks.
Next Steps:
Considering the dividend attributes we analyzed above, Credit Corp Group is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three pertinent aspects you should further research:
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Future Outlook: What are well-informed industry analysts predicting for CCP’s future growth? Take a look at our free research report of analyst consensus for CCP’s outlook.
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Valuation: What is CCP worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CCP is currently mispriced by the market.
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Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.