Citigroup (C) Could Be a Great Choice
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Citigroup in Focus
Based in New York, Citigroup (C) is in the Finance sector, and so far this year, shares have seen a price change of 5.8%. The U.S. bank is currently shelling out a dividend of $0.56 per share, with a dividend yield of 3.01%. This compares to the Financial - Investment Bank industry's yield of 1% and the S&P 500's yield of 1.57%.
Looking at dividend growth, the company's current annualized dividend of $2.24 is up 2.8% from last year. In the past five-year period, Citigroup has increased its dividend 2 times on a year-over-year basis for an average annual increase of 1.58%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Citigroup's current payout ratio is 38%, meaning it paid out 38% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, C expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $7.47 per share, representing a year-over-year earnings growth rate of 25.55%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, C is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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This article originally published on Zacks Investment Research (zacks.com).
