Citizens Financial Group (NYSE:CFG) Has Announced A Dividend Of $0.42

Citizens Financial Group, Inc.'s (NYSE:CFG) investors are due to receive a payment of $0.42 per share on 15th of May. Based on this payment, the dividend yield on the company's stock will be 4.9%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Citizens Financial Group

Citizens Financial Group's Earnings Will Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Citizens Financial Group has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 60%shows that Citizens Financial Group 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 72.4%. Analysts estimate the future payout ratio will be 41% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Citizens Financial Group Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from an annual total of $0.40 in 2015 to the most recent total annual payment of $1.68. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Citizens Financial Group has seen earnings per share falling at 5.0% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Citizens Financial Group that investors need to be conscious of moving forward. Is Citizens Financial Group 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.