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Citizens Holding Company (NASDAQ:CIZN) has announced that it will pay a dividend of US$0.24 per share on the 30th of June. The dividend yield will be 5.3% based on this payment which is still above the industry average.
Citizens Holding's Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment made up 70% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.
Unless the company can turn things around, EPS could fall by 0.05% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 71%, which is definitely feasible to continue.
Citizens Holding Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The first annual payment during the last 10 years was US$0.88 in 2012, and the most recent fiscal year payment was US$0.96. Its dividends have grown at less than 1% per annum over this time frame. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
Dividend Growth May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Citizens Holding hasn't seen much change in its earnings per share over the last five years.
Our Thoughts On Citizens Holding's Dividend
Overall, we think Citizens Holding is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Citizens Holding stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.