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Citizens Financial Services, Inc. (NASDAQ:CZFS) will increase its dividend from last year's comparable payment on the 30th of September to $0.48. Despite this raise, the dividend yield of 2.3% is only a modest boost to shareholder returns.
View our latest analysis for Citizens Financial Services
Citizens Financial Services' Dividend Forecasted To Be Well Covered By Earnings
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.
Having distributed dividends for at least 10 years, Citizens Financial Services has a long history of paying out a part of its earnings to shareholders. Based on Citizens Financial Services' last earnings report, the payout ratio is at a decent 27%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Over the next year, EPS is forecast to expand by 8.9%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 29% by next year, which is in a pretty sustainable range.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of $0.988 in 2012 to the most recent total annual payment of $1.88. This works out to be a compound annual growth rate (CAGR) of approximately 6.6% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Citizens Financial Services might have put its house in order since then, but we remain cautious.
The Dividend Looks Likely To Grow
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Citizens Financial Services has been growing its earnings per share at 14% a year over the past five years. Citizens Financial Services definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We Really Like Citizens Financial Services' Dividend
Overall, a dividend increase is always good, and we think that Citizens Financial Services is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Citizens Financial Services that investors should know about before committing capital to this stock. Is Citizens Financial Services not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.