We Wouldn't Be Too Quick To Buy Citizens Financial Group, Inc. (NYSE:CFG) Before It Goes Ex-Dividend

Citizens Financial Group, Inc. (NYSE:CFG) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Citizens Financial Group's shares before the 30th of April in order to receive the dividend, which the company will pay on the 15th of May.

The company's next dividend payment will be US$0.42 per share. Last year, in total, the company distributed US$1.68 to shareholders. Based on the last year's worth of payments, Citizens Financial Group has a trailing yield of 4.8% on the current stock price of US$35.00. If you buy this business for its dividend, you should have an idea of whether Citizens Financial Group's dividend is reliable and sustainable. So we need to investigate whether Citizens Financial Group can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Citizens Financial Group

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Citizens Financial Group paid out more than half (60%) 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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's not ideal to see Citizens Financial Group's earnings per share have been shrinking at 4.2% a year over the previous five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past nine years, Citizens Financial Group has increased its dividend at approximately 17% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

To Sum It Up

Should investors buy Citizens Financial Group for the upcoming dividend? We're not overly enthused to see Citizens Financial Group's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

With that being said, if you're still considering Citizens Financial Group as an investment, you'll find it beneficial to know what risks this stock is facing. In terms of investment risks, we've identified 2 warning signs with Citizens Financial Group 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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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.