Citizens Financial Group, Inc.'s (NYSE:CFG) investors are due to receive a payment of US$0.39 per share on 11th of February. This means the annual payment is 3.1% of the current stock price, which is above the average for the industry.
Citizens Financial Group's Payment Has Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Citizens Financial Group's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to fall by 21.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 47%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Citizens Financial Group Is Still Building Its Track Record
It is great to see that Citizens Financial Group has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The first annual payment during the last 7 years was US$0.40 in 2015, and the most recent fiscal year payment was US$1.56. This means that it has been growing its distributions at 21% per annum 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 Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Citizens Financial Group has been growing its earnings per share at 21% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
Citizens Financial Group Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Citizens Financial Group that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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