Citigroup’s $21.5-Billion Capital Return Plan For 2019 Is Slightly Lower Than Its 2018 Plan

by Trefis Team
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Citigroup (NYSE:C) will be returning $21.5 billion to its shareholders over the next twelve months as a part of its latest capital return plan released last week. While the bank’s quarterly dividend is set to be increased from 45 cents to 51 cents, the total payout this time around is lower than the one declared in 2018. Trefis has analyzed the trends in the bank’s dividend payouts and share repurchases over the last 5 years and has summarized expectations for the next three in an interactive dashboard, A Detailed Look At Citigroup’s Dividend Payout and Share Repurchases, where you can modify forecasts to see the impact of changes on the bank’s share repurchases and dividends over coming years. Additionally, you can also see more Trefis data for financial services companies here

Citigroup’s 2019 Capital Return Plan

  • Under the new plan, Citigroup will hike its quarterly dividends by 13.3% – from 45 cents now to 51 cents a share beginning Q3 2019. This works out to total dividends of $4.4 billion assuming average outstanding shares of 2.16 billion.
  • The bank will also repurchase $17.1 billion worth of its common shares over the next twelve months, which is 2.8% less than the previous capital return plan.
  • The latest capital return plan of $21.5 billion over Q3 2019-Q2 2020 represents a 2.3% drop compared to the $22 billion in dividends and share repurchases Citigroup announced in 2018.

The chart below details Citigroup’s total shareholder payouts for each year since 2013, and includes our forecast for the next three years.

Historical Payouts

  • Citigroup was known for handing out handsome dividends in the pre-2008 era, with total dividends exceeding $9 billion each year between 2005 and 2007.
  • Dividends were slashed in 2008 and were completely stopped until Q1 2011, after which they were increased to the token figure of one cent per share for the next 15 quarters.
  • It finally improved to 5 cents per share in Q2 2015, followed by a three-fold jump to 16 cents per quarter in Q3 2016.
  • This trend continued over subsequent years as dividends were boosted to 32 cents per share in Q3 2017, before increasing to 45 cents per share in Q3 2018.
  • Based on the 2019 capital return plan, dividends will now be 51 cents per share for the next twelve months.
  • Over the last ten years, Citigroup has returned $54.6 billion in cash to common shareholders, an average of $5.5 billion a year – representing about 69% of its total retained earnings of $78.7 billion for this period (including losses of around $30 billion and $9 billion in 2008 and 2009 due to the downturn, and a loss of $7.5 billion in 2017 due to one-time charges linked to the new tax act).
  • Notably, Citigroup’s dividend payout over 2009-18 was just $8.8 billion compared to share buybacks of $45.8 billion – indicating a preference for returning cash to investors through share repurchases.

What To Expect In 2019

  • We expect total dividends to be around $4.4 billion, as the annual dividend per share will increase to $7.41 from $6.69 in 2018. Also, the bank has repurchased $4 billion in shares in Q1 2019 and should have repurchased around $3.6 billion in shares over the second quarter.
  • Taken together with $8.55 billion in proposed purchases for the rest of the year (half of the total proposed repurchases of $17.1 billion), total share repurchases is expected to be around $16.2 billion for 2019.
  • The total payout for the year is, therefore, likely to be over $20.6 billion – exceeding our forecast for the bank’s net income ($16.8 billion) by 22.8%.
  • That said, total shareholder payout for the year 2019 will be the largest ever by the bank in a year.

We factor in these payouts in our analysis of Citigroup in the form of an adjusted dividend payout rate (which is the total payout ratio), shown in the chart below.

Do not agree with our forecast? Create your own forecast for Citigroup by changing the base inputs (blue dots) on our interactive dashboard.

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