Citizens & Northern Corporation (NASDAQ:CZNC) has announced that it will pay a dividend of $0.28 per share on the 11th of November. This makes the dividend yield 4.5%, which will augment investor returns quite nicely.
Citizens & Northern's Dividend Forecasted To Be Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.
Having distributed dividends for at least 10 years, Citizens & Northern has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 67%, which means that Citizens & Northern would be able to pay its last dividend without pressure on the balance sheet.
Looking forward, earnings per share could rise by 5.3% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the future payout ratio will be 64%, which is in the range that makes us comfortable with the sustainability of the dividend.
Citizens & Northern Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from $0.72 total annually to $1.12. This works out to be a compound annual growth rate (CAGR) of approximately 4.5% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
The Dividend Has Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Citizens & Northern has been growing its earnings per share at 5.3% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
We Really Like Citizens & Northern's Dividend
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. 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.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. See if management have their own wealth at stake, by checking insider shareholdings in Citizens & Northern stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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