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Is It Smart To Buy Citrix Systems, Inc. (NASDAQ:CTXS) Before It Goes Ex-Dividend?

Simply Wall St

It looks like Citrix Systems, Inc. (NASDAQ:CTXS) is about to go ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 5th of September will not receive this dividend, which will be paid on the 20th of September.

Citrix Systems's next dividend payment will be US$0.35 per share. Last year, in total, the company distributed US$1.40 to shareholders. Last year's total dividend payments show that Citrix Systems has a trailing yield of 1.5% on the current share price of $92.98. If you buy this business for its dividend, you should have an idea of whether Citrix Systems's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Citrix Systems

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. Citrix Systems paid out a comfortable 26% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 16% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Citrix Systems's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

NasdaqGS:CTXS Historical Dividend Yield, August 31st 2019

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Citrix Systems's earnings per share have been growing at 17% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Given that Citrix Systems has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Should investors buy Citrix Systems for the upcoming dividend? Citrix Systems has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.

Ever wonder what the future holds for Citrix Systems? See what the 16 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.