Citigroup (NYSE:C) Will Pay A Larger Dividend Than Last Year At $0.60

Citigroup Inc. (NYSE:C) will increase its dividend on the 22nd of August to $0.60, which is 7.1% higher than last year's payment from the same period of $0.56. Even though the dividend went up, the yield is still quite low at only 2.4%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Citigroup's stock price has increased by 47% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Citigroup's Dividend Forecasted To Be Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Having distributed dividends for at least 10 years, Citigroup has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 33%, which means that Citigroup would be able to pay its last dividend without pressure on the balance sheet.

Over the next 3 years, EPS is forecast to expand by 69.8%. The future payout ratio could be 30% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

View our latest analysis for Citigroup

Citigroup Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.04 in 2015 to the most recent total annual payment of $2.24. This implies that the company grew its distributions at a yearly rate of about 50% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Earnings per share has been crawling upwards at 4.0% per year. While growth may be thin on the ground, Citigroup could always pay out a higher proportion of earnings to increase shareholder returns.

We Really Like Citigroup's Dividend

Overall, a dividend increase is always good, and we think that Citigroup is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 15 Citigroup analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Citigroup not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.