It looks like Citizens & Northern Corporation (NASDAQ:CZNC) is about to go ex-dividend in the next 3 days. Investors can purchase shares before the 24th of January in order to be eligible for this dividend, which will be paid on the 7th of February.
Citizens & Northern's next dividend payment will be US$0.27 per share. Last year, in total, the company distributed US$1.08 to shareholders. Based on the last year's worth of payments, Citizens & Northern has a trailing yield of 3.9% on the current stock price of $27.73. If you buy this business for its dividend, you should have an idea of whether Citizens & Northern's dividend is reliable and sustainable. So we need to investigate whether Citizens & Northern can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Citizens & Northern is paying out an acceptable 74% of its profit, a common payout level among most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Citizens & Northern's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Citizens & Northern has delivered an average of 1.2% per year annual increase in its dividend, based on the past ten years of dividend payments.
Has Citizens & Northern got what it takes to maintain its dividend payments? Citizens & Northern has been struggling to generate growth while also paying out more than half of its earnings to shareholders as dividends. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.
Want to learn more about Citizens & Northern's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
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.
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