Last update on 2024-06-27

Citigroup (C) - Dividend Analysis (Final Score: 5/8)

In-depth analysis of Citigroup's (C) dividend performance using an 8-criteria scoring system. Final score: 5/8. Learn about yield, growth, and sustainability.

Short Analysis - Dividend Score: 5

We're running Citigroup (C) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Let's break down the analysis of Citigroup's dividend policy against 8 key criteria. 1. **Dividend Yield:** Citigroup's dividend yield is 4.0435%, which is higher than the industry average of 3.24%. Historically, the yield has seen dramatic fluctuations but shows an upward trend lately. 2. **Dividend Growth Rate:** The average annual growth rate is around 23% over 20 years, which is above the 5% threshold. However, the inconsistency and volatility of this growth can be concerning. 3. **Payout Ratio:** With an average payout ratio of 27.59%, Citigroup keeps a conservative balance, well below the 65% benchmark. 4. **Dividend Coverage by Earnings:** Recent trends show dividends are better covered by earnings, although spikes in specific years suggest potential inconsistency. 5. **Dividend Coverage by Cash Flow:** Stable cash flow coverage is critical for dividend sustainability, reassuring investors of a steady income stream. 6. **Stable Dividends:** Citigroup's dividends were unstable historically, especially during the financial crisis, making it inconsistent for income-seeking investors. 7. **Paid Dividends for Over 25 Years:** Yes, but historical reductions during financial instability cast doubt on robustness. 8. **Reliable Stock Repurchases:** Mixed trends, with more consistent buybacks in recent years suggesting improved financial health. Citigroup does not fully meet all the criteria, showing particular instability in dividend payments during the financial crisis but improving in recent years.

Insights for Value Investors Seeking Stable Income

Overall, Citigroup is working towards stabilizing its dividends and has shown improvement post-financial crisis. While it's promising, the inconsistencies and historical instabilities mean it may not be the safest bet for income-seeking investors. However, improved financial health and forward trends might make it worth considering for those who are cautiously optimistic and looking for long-term gains. It’s advisable to keep a close watch on their financial health and overall market position going forward.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

dividend yield

Citigroup's current dividend yield of 4.0435% surpasses the industry average of 3.24%. Analyzing Citigroup's historical data, the yield exhibits high variability, seen in its dramatic rise to 16.6915% in 2008 and subsequent significant falls. The upward trend over the past decade, culminating in the current higher-than-average yield, suggests improved stability and profitability. However, the drop in stock price to $51.44 from a high of $79.89 in 2019 complicates this picture. Despite this, the higher dividend yield is presently favorable, indicating a potentially lucrative return for investors amid a recovering payout strategy.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate (DGR) is a key metric that indicates how much a company's dividend payments have increased over a specific period. A growth rate higher than 5% signifies that the company is consistently increasing dividends, which is an attractive signal for investors looking for income growth. It also reflects positively on the company's financial health and future prospects.

Analyzing the Dividend Ratio for Citigroup (C) over the last 20 years, the data shows a highly erratic trend oscillating between sharp declines and substantial increases, with specific instances of significant drops (e.g., -64.687 in 2003, -99.1071 in 2009, and -100 in 2010) and notable gains (e.g., 300 in 2015 and 162.5 in 2016). The average Dividend Ratio across these years is approximately 23%, surpassing the 5% threshold comfortably. However, due to inconsistent dividend payments and the presence of years with zero growth, the overall reliability of this growth rate is questionable. While the average indicator is promising, potential investors should be wary of the volatility and consider the broader financial stability of Citigroup.

Average annual Payout Ratio lower than 65% in the last 20 years?

Average Payout Ratio lower than 65% over the past 20 years indicates the percentage of earnings paid to shareholders in the form of dividends compared to the earnings retained by the company for growth and debt reduction.

Let's examine Citigroup's payout ratio over the last 20 years. With an average payout ratio of around 27.59%, Citigroup has consistently paid a conservative portion of its earnings as dividends. This payout ratio is significantly below the 65% threshold, indicating a prudent balance between rewarding shareholders and retaining earnings for further growth or debt service. Particularly, in the years 2008 to 2012, the payout ratio plummeted due to the financial crisis impacting Citigroup's profitability. Interestingly, some negative values and nearly zero payout ratios in specific years like 2008 and 2009 should be noted, reflecting the severe financial distress during the global recession. On the other hand, recent years appear more stable with payout ratios aligning in the reasonable range below the benchmark.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings. This criterion examines the ability of a company to pay dividends from its net income. It's typically measured as the dividend payout ratio, where a lower ratio is generally considered better as it implies more income is retained for growth and stability.

Reviewing Citigroup's earnings per share (EPS) and dividend per share (DPS) from 2003 to 2023 shows a mixed trend in the coverage of dividends by earnings. For instance, the EPS values have been volatile, with significant drops during years like 2008 and 2017, where negative earnings were recorded. The derived coverage ratios show instances of over-extended dividends relative to earnings, especially during years like 2007, 2008, and 2017, where the ratios were exceptionally poor or even negative. However, recent years (starting from 2015) have shown a stabilizing trend with improved coverage ratios, albeit spikes signalling potential inconsistency remain, like 2017 and 2020. While the trend shows improvement over time, volatility in financial performance suggests cautious optimism is warranted when analyzing the future sustainability of Citigroup's dividends. A stable or improving EPS with a moderate dividend payout ratio typically indicates better dividend sustainability, something Citigroup has been working towards but not consistently achieved.

Dividends Well Covered by Cash Flow?

Explain the criterion for Citigroup (C) and why it is important to consider

Dividends Well Covered by Cash Flow is a critical measure in assessing the sustainability of a company's dividend payments. If dividends are well-covered by the free cash flow, it indicates that the company has enough liquid resources to pay its shareholders without resorting to external financing or reducing cash reserves. It serves as an essential confidence booster for investors relying on a stable income stream from their investments.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments over an extensive period is paramount to income-seeking investors. A consistent dividend not only indicates a company's steady cash flow but also reflects its commitment to returning value to shareholders. It reassures investors regarding the predictability of their income stream.

From 2003 to 2007, Citigroup's dividend per share showed a growth from $11 to over $21, but was sharply reduced to $11.2 by 2008. The following years saw drastic cuts to almost zero in 2009 and 2010. The dividend slightly recovered post-2011 but only in fractions of a dollar till 2014. Incremental developments are seen reaching $2.08 per share recently by 2023. During these two decades, the dividend did drop by more than 20% on multiple occasions, notably during the financial crisis era, which could be an alarm for income-seeking investors seeking stability. Although there's consistent growth in the last decade, historical steep cuts do raise concerns over long-term stability. Citigroup does not pass this criterion as their dividends have been notably unstable over a remarkable period.

Dividends Paid for Over 25 Years?

Criterion 6 pertains to the consistency and longevity of a company's dividend payments, which is crucial for assessing its financial health and reliability.

Citigroup has paid dividends consistently for over 25 years, which initially indicates a good trend. However, the consistency is not as robust as it seems when closely examined. For instance, the dividend per share in 2008 was significantly reduced from $21.6 to $11.2, and in 2009 and 2010, it dropped to $0.1 and $0, respectively, largely due to the financial crisis. Post-2010, Citigroup has gradually increased its dividends to current levels but at a much slower pace. The company's effort to reinstate and increase its dividend per share over the past decade shows a commitment to rewarding shareholders, which is positive. However, the sharp decrease during the financial crisis reflects moments of significant financial instability, which adds a layer of complexity to evaluating this criterion positively.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases over the past 20 years assess how consistently a company has bought back its own shares. This is significant because it can indicate management’s confidence in the company’s value, reduce the number of shares outstanding (potentially increasing EPS), and provide a return to shareholders. Consistent repurchases often reflect strong free cash flow and financial health.

The data from Citigroup shows a mixed trend in share repurchasing over the past 20 years. While several years, especially in recent history (2014-2023), indicate reliable repurchase activity, there was a period (2008-2013) of significant dilution due to the financial crisis, where share counts spiked, especially evident in 2009 with a peak at 1.21 billion shares. The period post-2014 shows a return to more consistent and reliable repurchasing (e.g., shares were gradually reduced from 3.03 billion in 2014 to about 1.94 billion in 2022). Specifically, from 2015-2023, the average repurchase was around 11.2389 years, which underscores strong and focused buybacks in recent times. This trend is favorable as it indicates improved financial health and a targeted approach to return value to shareholders.