Is Citizens First Corp. (CZFC) A Good Stock To Buy Right Now?

Citizens First trades below tangible book value because the bank hasn’t paid a common dividend since December 2008. Rather than returning capital to common shareholders, the bank has been buying back securities that it issued in exchange for Federal TARP assistance. After steadily paying back the Federal government, Citizens First has completely exited from the Federal TARP program. The bank bought back the last 254,218 warrants that it issued to the government on April 15.

Citizens First Corporation’s complete exit from all aspects of the TARP program gives management the freedom to return capital to shareholders. According to management, Citizens First Corporation is considering returning capital in the form of a dividend in the near future. With a trailing twelve month EPS of $1.37 per share, the bank has an earnings yield of 10.8% and could sustain a dividend yield of 3% and still have a payout ratio of under 30%.

Because management is conservative, we do not anticipate that Citizens First Corporation will pay a 3% dividend yield.  Because its loan growth is weak, we do not believe the bank deserves the peer average 1.4x tangible book multiple either.

If the bank starts off with a 1% dividend yield, we believe the Citizens First Corp. (NASDAQ:CZFC) will trade at 1.1x tangible book. If the bank pays a 2% dividend yield, we see Citizens First trading for 1.2x tangible book, giving shares 25% upside. As with all illiquid stocks, shareholders are advised to use limit orders rather than market orders.

Disclosure: None