Should You Buy Citi Trends Inc (NASDAQ:CTRN) For Its 1.4% Dividend?
A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. In the last few years Citi Trends Inc (NASDAQ:CTRN) has paid a dividend to shareholders. Today it yields 1.4%. Should it have a place in your portfolio? Let’s take a look at Citi Trends in more detail.
Check out our latest analysis for Citi Trends
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is it paying an annual yield above 75% of dividend payers?
Has it paid dividend every year without dramatically reducing payout in the past?
Has it increased its dividend per share amount over the past?
Is is able to pay the current rate of dividends from its earnings?
Will it be able to continue to payout at the current rate in the future?
Does Citi Trends pass our checks?
The current trailing twelve-month payout ratio for the stock is 21%, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When assessing the forecast sustainability of a dividend it is also worth considering 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.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider Citi Trends as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Citi Trends has a yield of 1.4%, which is on the low-side for Specialty Retail stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Citi Trends for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three fundamental factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for CTRN’s future growth? Take a look at our free research report of analyst consensus for CTRN’s outlook.
Valuation: What is CTRN 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 CTRN is currently mispriced by the market.
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.
