Should You Buy Citizens & Northern Corporation (NASDAQ:CZNC) For Its Upcoming Dividend?
Citizens & Northern Corporation (NASDAQ:CZNC) is about to trade ex-dividend in the next 3 days. 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Citizens & Northern's shares on or after the 2nd of November will not receive the dividend, which will be paid on the 13th of November.
The company's next dividend payment will be US$0.30 per share, and in the last 12 months, the company paid a total of US$1.20 per share. Based on the last year's worth of payments, Citizens & Northern stock has a trailing yield of around 4.4% on the current share price of US$27.49. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
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 paid out more than half (57%) of its earnings last year, which is a regular payout ratio for most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
View our latest analysis for Citizens & Northern
Click here to see how much of its profit Citizens & Northern paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Citizens & Northern, with earnings per share up 8.5% on average over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Citizens & Northern has lifted its dividend by approximately 1.4% a year on average.
Final Takeaway
Should investors buy Citizens & Northern for the upcoming dividend? Citizens & Northern has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of 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.
If you want to look further into Citizens & Northern, it's worth knowing the risks this business faces. In terms of investment risks, we've identified 2 warning signs with Citizens & Northern and understanding them should be part of your investment process.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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