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The board of Citizens Financial Group, Inc. (NYSE:CFG) has announced that it will pay a dividend of $0.42 per share on the 14th of May. This means the annual payment is 4.7% of the current stock price, which is above the average for the industry.
Citizens Financial Group's Payment Expected To Have Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.
Having distributed dividends for at least 10 years, Citizens Financial Group 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 53%, which means 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 83.7%. Analysts forecast the future payout ratio could be 35% over the same time horizon, which is a number we think the company can maintain.
See our latest analysis for Citizens Financial Group
Citizens Financial Group Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.40 in 2015 to the most recent total annual payment of $1.68. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
The Dividend's Growth Prospects Are Limited
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Citizens Financial Group hasn't seen much change in its earnings per share over the last five years. Growth of 1.7% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.
We Really Like Citizens Financial Group's Dividend
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.