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It Might Be Better To Avoid Citizens Holding Company's (NASDAQ:CIZN) Upcoming 1.2% Dividend

Simply Wall St

It looks like Citizens Holding Company (NASDAQ:CIZN) is about to go ex-dividend in the next 4 days. You will need to purchase shares before the 13th of September to receive the dividend, which will be paid on the 30th of September.

Citizens Holding's next dividend payment will be US$0.24 per share. Last year, in total, the company distributed US$0.96 to shareholders. 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. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Citizens Holding has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Citizens Holding

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. It paid out 81% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline.

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, September 8th 2019
NasdaqGM:CIZN Historical Dividend Yield, September 8th 2019

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see Citizens Holding's earnings per share have been shrinking at 4.2% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Citizens Holding has lifted its dividend by approximately 1.8% a year on average.

The Bottom Line

Is Citizens Holding worth buying for its dividend? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

Want to learn more about Citizens Holding? Here's a visualisation of its historical rate of 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.

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.

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. Thank you for reading.