S&P/ASX 200 Index (ASX: XJO) dividend stock Credit Corp Group Ltd (ASX: CCP) has been raised from a neutral rating to an outperform rating by the team at Macquarie Group Ltd (ASX: MQG).
Credit Corp shares closed up 0.9% on Friday, trading for $13.72 apiece. That sees shares in the debt collection company down 24.5% over 12 months.
Though those losses will be somewhat mitigated by the two fully franked dividends totalling 68 cents a share the company paid out over the full year. At Friday's closing price, that sees Credit Corp shares trading on a fully franked trailing dividend yield of 5.0%.
Now, here's why Macquarie expects a much stronger performance from Credit Corp shares in the year ahead.
ASX 200 dividend stock earns an upgrade
In a report released on Thursday, Macquarie upgraded Credit Corp shares to outperform after analysing the latest results from rival United States operating debt collection companies PRA Group and Encore Capital "to provide a read-through for CCP's US segment".
And those results have some promising implications for the ASX 200 dividend stock.
For Encore Capital's US segment, the broker said:
US purchases were +13% yoy, "capitalising on the ongoing attractive market opportunity…driven by ample portfolio supply. "
Collections: +25% yoy, supported by "deployment of new technologies, enhanced digital capabilities and continued operational innovation".
As for the outlook, Macquarie noted:
Encore raised FY25 global collections guidance to ~$2.55bn, +18% yoy. FY25 portfolio purchasing guidance to exceed the $1.35bn in 2024 is unchanged, as the US segment is set to surpass the $995m record level in 2024.
Supply: U.S. revolving credit remains near record levels, while the credit card charge-off rate increased to its highest level in more than 10 years in 2024 and still remains elevated. Lending and elevated charge-off rates continues to drive portfolio supply. U.S. consumer credit delinquencies, a leading indicator of future charge-offs, also remain near multi-year highs. "Purchasing conditions in the U.S. market remain highly favourable".
Turning to PRA Group's US segment Macquarie noted:
Purchases: 3Q25 purchases down 47% vs pcp, the 3rd consecutive qtr of declines as PRA are "more selective and maximising value".
Collections: US Core cash collections $310m, +16%, supported by 27% increase in legal collections following investment in the channel.
Outlook: Purchases guidance of $1.2bn (unchanged), vs $1.4bn in 2024.
Connecting the dots, Macquarie said, "Despite Macro uncertainty, operating performance and conditions support the outlook and the valuation is attractive."
The broker has a 12-month target price of $16.70 for the ASX 200 dividend stock. That represents a potential upside of 21.7% from Friday's closing price.
And it doesn't include those upcoming dividends.
