Is Citigroup Inc. (C) The Best Cheap Dividend Stock To Buy Right Now?
We are experiencing some temporary issues. The market data on this page is currently delayed. Please bear with us as we address this and restore your personalized lists.
We recently published a list of 13 Best Cheap Dividend Stocks To Buy Right Now. In this article, we are going to take a look at where Citigroup Inc. (NYSE:C) stands against other best cheap dividend stocks to buy right now.
Value investing has remained a favored approach among investors for years, largely popularized by Warren Buffett, who continues to focus on stocks he believes are undervalued relative to their true worth. While growth investing has dominated market sentiment in recent times, the long-term performance of value stocks remains solid.
Former professor-turned-investment manager Josef Lakonishok and value investing specialist David Dreman strongly advocated for a patient, long-term approach to investing, believing that steady, disciplined strategies often outperform rapid, high-growth ones. Their research indicated that value investing tends to outperform growth strategies approximately 70% of the time, regardless of a company’s size. After analyzing companies across different market capitalizations, they found that, over long periods, value stocks consistently generated average annual returns slightly above 7%, surpassing the performance of growth stocks.
READ ALSO: 10 Companies that Just Raised their Dividends
Much of the Russell Index’s gains this year have been concentrated in a handful of mega-cap stocks, particularly the tech-heavy “Magnificent Seven.” These companies now make up over 25% of the index and were responsible for nearly 40% of its 21% total return in the first three quarters of 2024. However, market dynamics have started to shift in recent months, with value stocks gaining traction. In the third quarter, the Russell Value Index surged 9.4%, significantly outpacing the 3.2% rise in the Russell Growth Index, according to a report from BlackRock.
The report highlighted several key drivers behind this trend. Strong employment numbers, easing inflation, and the Federal Reserve’s move to start cutting interest rates have bolstered investor confidence, prompting a broader market rally beyond the dominant mega-cap stocks. Additionally, sectors that are more sensitive to interest rates—such as financials, utilities, and real estate investment trusts (REITs)—have benefited from a lower-rate environment.
Analysts advise investors against favoring a single investment strategy. JP Morgan noted that large technology companies are widely held both individually and within major indices. As a result, significant market fluctuations can occur when developments—such as the recent introduction of a Chinese large language model in late January—impact the sector. However, the firm does not recommend actively betting against the dominant tech giants that hold the largest weightings in the broader market.
Drawing comparisons to the dot-com bubble of 2000, JP Morgan highlighted that the leading companies of that era traded at forward price-to-earnings ratios between 50x and 75x. In contrast, most of today’s mega-cap stocks are valued at roughly half of those peak multiples. The firm further advised investors to diversify beyond growth equities, particularly by considering financial stocks. Alongside industrials, a balanced approach between growth and value stocks remains its preferred strategy.
Stocks that pay dividends are often associated with value investing, as they generally provide higher yields and demonstrate stronger financial stability compared to growth stocks. According to a report by S&P Dow Jones Indices, investment strategies centered on generating income tend to share traits commonly found in value stocks. Companies with attractive dividend yields and lower valuations often capture investor attention.
However, the report also pointed out that the Dividend Aristocrats Index does not adhere strictly to a value-focused approach. Instead, it maintains a mix of both growth and value stocks. A long-term review of the index, covering the period from 1999 to 2022, indicated that, on average, 59.04% of its holdings were classified as value stocks, while 40.94% fell into the growth category.
For this list, we used a Finviz screener and identified dividend companies with forward P/E ratios below 15, as of March 6. The low price-to-earnings ratio shows that they are traded below their intrinsic value. From the resultant dataset, we selected 13 companies that have the highest number of hedge fund investors at the end of Q4 2023. The stocks are ranked in ascending order of hedge funds having stakes in them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A team of financial advisors huddled around a desk, discussing the best investment strategy for their client.
Number of Hedge Fund Holders: 101
Forward P/E Ratio: 9.67
Citigroup Inc. (NYSE:C) is a multinational investment banking company that offers a diverse range of financial products and services. The company operates through three primary business segments: Global Consumer Banking, Institutional Clients Group, and Treasury and Trade Solutions. By leveraging its extensive customer base and international presence, Citigroup aims to strengthen its competitive position in the market.
Citigroup Inc. (NYSE:C) has declined sharply between February 28 and March 6 following reports of manual errors in bank transfers, highlighting an ongoing regulatory challenge the bank has been working to address in recent years. According to a report by The Financial Times, the bank mistakenly deposited $81 trillion into a client’s account instead of the intended $280, adding to a series of errors the bank has been working to correct as it seeks to rebuild its reputation. In another news, Bloomberg reported that Citigroup’s wealth management division came close to mistakenly transferring $6 billion to a client’s account.
The reports raise concerns as regulators issued a consent order against Citigroup Inc. (NYSE:C) in 2020, along with a $400 million fine, due to the bank’s failure to address persistent internal and risk control issues. This order was partly influenced by the bank’s accidental transfer of $900 million to Revlon creditors that same year. In July 2023, regulators imposed another fine of $136 million on the bank for delays in resolving the issues outlined in the 2020 consent order.
Analysts believe that while these mistakes may have long-term implications, they are still viewed as short-term setbacks in light of the bank’s overall performance. Citigroup Inc. (NYSE:C) is a strong dividend payer, distributing $6.7 billion to shareholders through dividends and stock buybacks in FY24, reinforcing its commitment to delivering shareholder value. With a 34-year track record of uninterrupted dividend payments, it is one of the best dividend stocks to consider. The company pays a quarterly dividend of $0.56 per share and has a dividend yield of 3.17%, as of March 6.
Overall, C ranks 2nd on our list of best cheap dividend stocks to buy right now. While we acknowledge the potential for C as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than C but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires
Disclosure: None. This article is originally published at Insider Monkey.
Sign in to access your portfolio
