Citizens Financial Services, Inc. (NASDAQ:CZFS) has announced that it will be increasing its periodic dividend on the 28th of March to $0.495, which will be 1.0% higher than last year's comparable payment amount of $0.49. Based on this payment, the dividend yield for the company will be 3.3%, which is fairly typical for the industry.

View our latest analysis for Citizens Financial Services

Citizens Financial Services' Earnings Will Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

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 33%, which means that Citizens Financial Services would be able to pay its last dividend without pressure on the balance sheet.

Over the next 3 years, EPS is forecast to expand by 22.7%. The future payout ratio could be 30% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Citizens Financial Services Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the annual payment back then was $1.38, compared to the most recent full-year payment of $1.96. This works out to be a compound annual growth rate (CAGR) of approximately 3.6% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Earnings have grown at around 2.1% a year for the past five years, which isn't massive but still better than seeing them shrink. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Are management backing themselves to deliver performance? Check their shareholdings in Citizens Financial Services in our latest insider ownership analysis. If you are a dividend investor, you might also want to look at our curated 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.