Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. However, 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 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 30.58% since the start of the year. Currently paying a dividend of $0.45 per share, the company has a dividend yield of 2.65%. In comparison, the Banks - Major Regional industry's yield is 2.86%, while the S&P 500's yield is 1.94%.
Taking a look at the company's dividend growth, its current annualized dividend of $1.80 is up 16.9% from last year. In the past five-year period, Citigroup has increased its dividend 4 times on a year-over-year basis for an average annual increase of 145.49%. 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. Citigroup's current payout ratio is 26%. This means it paid out 26% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, C expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $7.60 per share, with earnings expected to increase 14.29% from the year ago period.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, C presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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Citigroup Inc. (C) : Free Stock Analysis Report
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