Citizens Financial Group (CFG) is the parent company of Citizens Bank, one of the oldest banks in the United States. The Providence, Rhode Island-based company traces its roots back to 1828, the year Andrew Jackson was elected president.
That was a long time ago, to say the least.
Citizens serves customers in 14 states and Washington, D.C., with 1,000 branches and more than $220 billion in assets.
The company currently pays a $0.46 per share quarterly dividend, which comes out to a 2.5% yield.
When we determine a bank’s dividend safety, we look at net interest income, the difference between what the bank earns from lending money and its expenses, including borrowing costs.
Last year, Citizens generated $5.85 billion in net interest income, which was a 3.9% increase over 2024. However, it was a 0.9% decline from 2022.
Safety Net includes both one- and three-year growth rates when determining dividend safety, so that leads to a reduction in Citizens’ grade.
This year, the net interest income projection is very similar to last year’s. Wall Street expects Citizens to generate $5.83 billion.
That is 0.4% below last year’s total and 2.3% less than 2023’s.
Even though the expected figure is extremely close to last year’s and 2023’s totals, Safety Net still assesses a penalty for each category.
Free cash flow (or, in the case of banks, net interest income) is the lifeblood of a company − and especially a company’s ability to pay dividends. That’s why any decrease, no matter how small, is treated severely. A reduction in cash flow can be an early warning sign that the dividend could be in trouble.
The good news is that Citizens’ payout ratio is very low.
Last year, the company paid shareholders $888 million, or just 15% of its net interest income. This year, dividends paid are expected to decline very slightly to $887 million, maintaining that 15% payout ratio.
In short, Citizens has no problem at all affording its current dividend.
The only issue is the negative trend in net interest income, which is also expected to continue in 2027 and 2028.
If Citizens can find just an extra $26 million in net interest income this year to show flat growth, it will receive an upgrade. If estimates for next year are raised just over 1%, another upgrade will follow.
Until then, because net interest income is moving in the wrong direction, the stock gets a low grade for dividend safety. However, that could change after the company reports full-year results in early 2027.
Dividend Safety Rating: D
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