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On the 12 October 2018, Credit Corp Group Limited (ASX:CCP) will be paying shareholders an upcoming dividend amount of AU$0.36 per share. However, investors must have bought the company’s stock before 01 October 2018 in order to qualify for the payment. That means you have only 4 days left! Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Credit Corp Group’s most recent financial data to examine its dividend characteristics in more detail.

See our latest analysis for Credit Corp Group

5 checks you should do on a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

• Is their annual yield among the top 25% of dividend payers?

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

• Has dividend per share amount increased over the past?

• Does earnings amply cover its dividend payments?

• Will the company be able to keep paying dividend based on the future earnings growth?

How does Credit Corp Group fare?

The company currently pays out 49.6% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect CCP’s payout to remain around the same level at 50.1% of its earnings, which leads to a dividend yield of around 3.6%. In addition to this, 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. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. CCP 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. This is an impressive feat, which makes CCP a true dividend rockstar.

Compared to its peers, Credit Corp Group produces a yield of 3.2%, which is on the low-side for Consumer Finance stocks.

Next Steps:

With these dividend metrics in mind, I definitely rank Credit Corp Group as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three key factors you should look at: