Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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.
Headquartered in New York, Citigroup (C) is a Finance stock that has seen a price change of 33.17% so far this year. The U.S. bank is paying out a dividend of $0.60 per share at the moment, with a dividend yield of 2.56% compared to the Financial - Investment Bank industry's yield of 1.02% and the S&P 500's yield of 1.49%.
Looking at dividend growth, the company's current annualized dividend of $2.40 is up 10.1% 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 2.19%. Looking ahead, future dividend growth will be dependent on earnings growth and 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 33%, meaning it paid out 33% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for C for this fiscal year. The Zacks Consensus Estimate for 2025 is $7.58 per share, representing a year-over-year earnings growth rate of 27.39%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers its shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. 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 #1 (Strong Buy).
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Citigroup Inc. (C): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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