Citigroup (C) Could Be a Great Choice

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

While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.

Citigroup (C) is headquartered in New York, and is in the Finance sector. The stock has seen a price change of -6.63% since the start of the year. The U.S. bank is currently shelling out a dividend of $0.60 per share, with a dividend yield of 2.2%. This compares to the Financial - Investment Bank industry's yield of 0.84% and the S&P 500's yield of 1.36%.

Looking at dividend growth, the company's current annualized dividend of $2.40 is up 3.4% from last year. Over the last 5 years, Citigroup has increased its dividend 2 times on a year-over-year basis for an average annual increase of 2.19%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Citigroup's current payout ratio is 30%, meaning it paid out 30% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, C expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $10.20 per share, which represents a year-over-year growth rate of 27.98%.

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers 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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, C 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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This article originally published on Zacks Investment Research (zacks.com).

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Source Zacks-com