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If you are interested in cashing in on Citi Trends Inc’s (NASDAQ:CTRN) upcoming dividend of US$0.08 per share, you only have 4 days left to buy the shares before its ex-dividend date, 10 December 2018, in time for dividends payable on the 26 December 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Citi Trends’s latest financial data to analyse its dividend attributes.

View our latest analysis for Citi Trends

How I analyze a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Is its annual yield among the top 25% of dividend-paying companies?

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

• Has dividend per share risen in the past couple of years?

• Is is able to pay the current rate of dividends from its earnings?

• Will the company be able to keep paying dividend based on the future earnings growth?

How well does Citi Trends fit our criteria?

Citi Trends has a trailing twelve-month payout ratio of 22%, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.

If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view Citi Trends as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Relative to peers, Citi Trends has a yield of 1.6%, which is on the low-side for Specialty Retail stocks.

Next Steps:

After digging a little deeper into Citi Trends’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three essential factors you should look at: