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Will Citigroup Raise Its Dividends in 2016?

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Dividends

In the pre-recession era, Citigroup (C) paid out high dividends to its investors. However, when the recession hit, the company slashed dividends and stopped them completely until 1Q11. For the next 15 quarters, the company paid minuscule dividends of $0.01 per share, which was hiked to $0.05 in 2Q15.

Citigroup is currently one of the stocks paying the lowest dividends in the banking space (KBE). In 2015, the company paid dividends of $0.16 per share. For 4Q15, it announced a dividend of $0.05 per share, flat on a quarterly basis. This translates to a dividend yield of 0.5% on an annualized basis based on a closing price of $40.27 on April 7, 2016.

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Share repurchase plans

In 2015, Citigroup announced a share repurchase plan worth $7.8 billion, its largest since 2005, reflecting the company’s confidence in its current valuations as well as its long-term prospects. During the fourth quarter alone, it purchased 31 million shares and returned $1.8 billion to shareholders in the form of buybacks and dividends.

Meanwhile, rival bank JPMorgan Chase (JPM) increased its share buybacks by $1.9 billion last month. Peers who have expanded their share-buyback programs in the last few months are as follows:

  • Capital One Financial (COF) added $300 million to its existing share repurchase plan in February.
  • Wells Fargo (WFC) expanded its buyback plan by $17 billion in January.
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