Readers hoping to buy Citizens Financial Services, Inc. (NASDAQ:CZFS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company’s record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. In other words, investors can purchase Citizens Financial Services’ shares before the 12th of December in order to be eligible for the dividend, which will be paid on the 26th of December.
The company’s next dividend payment will be US$0.50 per share, on the back of last year when the company paid a total of US$2.00 to shareholders. Calculating the last year’s worth of payments shows that Citizens Financial Services has a trailing yield of 3.5% on the current share price of US$56.75. If you buy this business for its dividend, you should have an idea of whether Citizens Financial Services’s dividend is reliable and sustainable. So we need to investigate whether Citizens Financial Services can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Fortunately Citizens Financial Services’s payout ratio is modest, at just 28% of profit.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
Check out our latest analysis for Citizens Financial Services
Click here to see how much of its profit Citizens Financial Services paid out over the last 12 months.
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we’re encouraged by the steady growth at Citizens Financial Services, with earnings per share up 6.4% on average 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 last 10 years, Citizens Financial Services has lifted its dividend by approximately 3.6% a year on average. We’re glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.