Citizens Financial Services (NASDAQ:CZFS) Is Increasing Its Dividend To $0.48

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' Payment Expected To Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive.

Citizens Financial Services has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 27%, which means that Citizens Financial Services would be able to pay its last dividend without pressure on the balance sheet.

Over the next year, EPS is forecast to expand by 8.9%. If the dividend continues along recent trends, we estimate the future payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut 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 implies that the company grew its distributions at a yearly rate of about 6.6% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

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. We are encouraged to see that Citizens Financial Services has grown earnings per share at 14% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Citizens Financial Services Looks Like A Great Dividend Stock

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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Citizens Financial Services that investors should take into consideration. 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.