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Don't Buy Citizens Holding Company (NASDAQ:CIZN) For Its Next Dividend Without Doing These Checks

Simply Wall St

Readers hoping to buy Citizens Holding Company (NASDAQ:CIZN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 16th of March, you won't be eligible to receive this dividend, when it is paid on the 31st of March.

Citizens Holding's next dividend payment will be US$0.24 per share, and in the last 12 months, the company paid a total of US$0.96 per share. Based on the last year's worth of payments, Citizens Holding has a trailing yield of 4.8% on the current stock price of $20.014. If you buy this business for its dividend, you should have an idea of whether Citizens Holding's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Citizens Holding

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Its dividend payout ratio is 82% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit Citizens Holding paid out over the last 12 months.

NasdaqGM:CIZN Historical Dividend Yield, March 11th 2020

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Citizens Holding's 5.3% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past ten years, Citizens Holding has increased its dividend at approximately 1.8% a year on average.

To Sum It Up

Is Citizens Holding worth buying for its dividend? We're not overly enthused to see Citizens Holding's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

So if you're still interested in Citizens Holding despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. To that end, you should learn about the 2 warning signs we've spotted with Citizens Holding (including 1 which makes us a bit uncomfortable).

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.