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Citizens & Northern Corporation (NASDAQ:CZNC) is about to trade ex-dividend in the next three days. You can purchase shares before the 30th of April in order to receive the dividend, which the company will pay on the 14th of May.
Citizens & Northern's upcoming dividend is US$0.28 a share, following on from the last 12 months, when the company distributed a total of US$1.12 per share to shareholders. Based on the last year's worth of payments, Citizens & Northern has a trailing yield of 4.6% on the current stock price of $24.33. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Citizens & Northern paid out 70% of its earnings to investors last year, a normal payout level for most businesses.
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?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Citizens & Northern earnings per share are up 2.8% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Citizens & Northern has increased its dividend at approximately 9.8% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Should investors buy Citizens & Northern for the upcoming dividend? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.
So if you want to do more digging on Citizens & Northern, you'll find it worthwhile knowing the risks that this stock faces. Case in point: We've spotted 2 warning signs for Citizens & Northern you should be aware of.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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. 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.
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