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 that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Citigroup in Focus
Citigroup (C) is headquartered in New York, and is in the Finance sector. The stock has seen a price change of 19.25% since the start of the year. Currently paying a dividend of $0.56 per share, the company has a dividend yield of 2.67%. In comparison, the Financial - Investment Bank industry's yield is 0.85%, while the S&P 500's yield is 1.52%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.24 is up 2.8% from last year. Over the last 5 years, Citigroup has increased its dividend 2 times on a year-over-year basis for an average annual increase of 1.58%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, Citigroup's payout ratio is 38%, which means 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 $7.53 per share, which represents a year-over-year growth rate of 26.55%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that C is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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Today, See These 5 Potential Home Runs >>Citigroup Inc. (C) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
