Here's What We Like About Citrix Systems' (NASDAQ:CTXS) Upcoming Dividend

It looks like Citrix Systems, Inc. (NASDAQ:CTXS) is about to go ex-dividend in the next three days. This means that investors who purchase shares on or after the 11th of March will not receive the dividend, which will be paid on the 26th of March.

Citrix Systems's next dividend payment will be US$0.37 per share, on the back of last year when the company paid a total of US$1.48 to shareholders. Based on the last year's worth of payments, Citrix Systems stock has a trailing yield of around 1.1% on the current share price of $135.47. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Citrix Systems can afford its dividend, and if the dividend could grow.

See our latest analysis for Citrix Systems

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Citrix Systems paid out a comfortable 34% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 19% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Citrix Systems has grown its earnings rapidly, up 25% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, two years ago, Citrix Systems has lifted its dividend by approximately 2.8% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Citrix Systems is keeping back more of its profits to grow the business.

The Bottom Line

Is Citrix Systems worth buying for its dividend? Citrix Systems has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Citrix Systems looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Citrix Systems has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 3 warning signs for Citrix Systems you should know about.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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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