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Why Citizens Financial Group (CFG) is a Top Dividend Stock for Your Portfolio

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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

Cash flow can come from bond interest, interest from other types of investments, and of course, 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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Citizens Financial Group in Focus

Based in Providence, Citizens Financial Group (CFG - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 3.68%. Currently paying a dividend of $0.42 per share, the company has a dividend yield of 4.12%. In comparison, the Financial - Savings and Loan industry's yield is 2.73%, while the S&P 500's yield is 1.62%.

In terms of dividend growth, the company's current annualized dividend of $1.68 is up 3.7% from last year. Citizens Financial Group has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 12.27%. 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, Citizens Financial Group's payout ratio is 35%, which means it paid out 35% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for CFG for this fiscal year. The Zacks Consensus Estimate for 2023 is $5.05 per share, which represents a year-over-year growth rate of 23.17%.

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. However, not all companies offer a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. 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, CFG 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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