Is it worth considering Citizens Holding Company (NASDAQ:CIZN) for its next dividend?

Citizens Holding Company (NASDAQ:CIZN) is set to trade ex-dividend in the next three days. The ex-dividend date is one business day before a company’s record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to know because any purchase of shares made on or after this date may mean late settlement that does not appear on the record date. As a result, Citizens Holding investors who buy the stock on or after September 15 will not receive the dividend, which will be paid on September 30.

The company’s next dividend payment will be $0.24 per share. Last year, in total, the company distributed US$0.96 to shareholders. Based on last year’s payouts, Citizens Holding has a 5.6% yield on the current share price of $17.06. Dividends contribute greatly to investment returns for long-term holders, but only if the dividend continues to be paid. We therefore need to consider whether Citizens Holding can afford its dividend and whether the dividend could increase.

Discover our latest analysis for Citizens Holding

Dividends are usually paid out of company earnings, so if a company pays out more than it has earned, its dividend is usually at risk of being reduced. Citizens Holding paid out more than half (65%) of its profits last year, which is a regular payout ratio for most companies.

Generally speaking, the lower a company’s payout ratios, the more resilient its dividend tends to be.

Click here to see how much of its profits Citizens Holding has paid out over the past 12 months.

NasdaqGM: Historic CIZN Dividend September 11, 2022

Have earnings and dividends increased?

Stocks with stable earnings can still be attractive dividend payers, but it’s important to be more conservative in your approach and demand a greater margin of safety when it comes to dividend sustainability. If earnings fall enough, the company could be forced to cut its dividend. With that in mind, we’re not thrilled to see that Citizens Holding’s earnings per share have remained virtually flat for the past five years. Better than seeing them fall off a cliff, of course, but the best dividend-paying stocks increase their earnings significantly over the long term.

Another key way to gauge a company’s dividend outlook is to measure its historical rate of dividend growth. Over the past 10 years, Citizens Holding has increased its dividend by around 0.9% per year on average.

Last takeaway

Does Citizens Holding have what it takes to maintain its dividend payments? Citizens Holding is struggling to generate growth while paying more than half of its profits to shareholders in the form of dividends. All in all, this is an average combination and we find it hard to get excited about the company from a dividend perspective.

While you’re not too concerned about Citizens Holding’s ability to pay dividends, you should still keep in mind some of the other risks this company faces. For example – Citizens Holding has 1 warning sign we think you should know.

A common investment mistake is to buy the first good stock you see. Here you can find a complete list of high yielding dividend stocks.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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