After the Dow Jones Industrial Average fell more than 1,000 points on Friday, investors cautiously returned to the markets on Monday. The dramatic sell-off occurred when news of the omicron variant spreading to further nations circulated. The CBOE Volatility Index has increased 38.4% over the past five days, indicating heightened volatility.
As the stock market is expected to remain volatile due to the fears related to the new strain, we feel it may be prudent to switch to dividend investing now to ensure a steady income stream. Moreover, it could be wise to pick the stocks from the banking sector, as banks usually perform better in an inflationary environment.
Fundamentally sound dividend-paying bank stocks Citigroup Inc. (C) and Banco Santander S.A (SAN) could be worth adding to your watchlist now. Wall Street analysts expect these stocks to rally 30% or more in the near term.
Citigroup Inc. (C)
C is a diversified financial service holding company that serves consumers, companies, governments, and institutions throughout North America, Latin America, Asia, Europe, the Middle East, and Africa. Global Consumer Banking (GCB) and Institutional Clients Group are the company’s two operational segments. It operated approximately 2,303 branches as of December 31, 2020, mainly in the United States, Mexico, and Asia.
This month, C unveiled a new global headquarters branch in New York City’s Tribeca area, complete with a state-of-the-art Client Center, providing a glimpse into the future of retail banking. According to the company, the 7,000square-foot concept space may be configured and shaped in a variety of ways to allow clients to create experiences ranging from the most basic activities to complicated investment planning.
C’s total revenue came in at $17.15 billion in the third quarter ended September 30, 2021. The company’s net income surged 47.6% from the prior-year quarter to $4.64 billion, while its EPS amounted to $2.15 over this period.
The company’s EPS is expected to grow 115% year-over-year to $10.47 in fiscal 2021. Analysts expect C’s revenue to increase 1.1% year-over-year to $71.94 billion next year. The stock has gained 14.8% over the past year and 5.5% year-to-date.
C’s annual dividend of $2.04 yields 3.1% on its current stock price. On November 24, the company paid a quarterly dividend of $0.51. It has a four-year average dividend yield of 2.8%.
Of the five Wall Street analysts that have provided ratings for the stock, four rated it Buy. Closing yesterday’s trading session at $65.04, the average analyst price target of $85.4 represents a potential 31.3% upside.
Banco Santander S.A (SAN)
SAN and its subsidiaries provide a comprehensive range of retail and commercial banking products and services to individuals, small and medium-sized businesses, and large corporations worldwide. It also engages in corporate banking, including treasury, risk hedging, international trading, confirming, custody, and investment banking. The company operates through a network of 11,236 branches.
During the third quarter ended September 30, 2021, SAN’s net interest income came in at €8.46 billion ($9.54 billion). The company reported a total income of €11.93 billion ($13.46 billion), while its net income amounted to €2.17 billion ($2.45 billion) over this period. Its EPS came in at €0.11 ($0.12) over this period.
The consensus EPS estimate of $0.43 for the current year represents a 38.7% improvement year-over-year. Analysts expect SAN’s revenue to increase 3.6% year-over-year to $52.95 billion in fiscal 2022. The stock has gained 8.6% over the past year.
SAN paid a quarterly dividend of $0.05 on November 05, which translates to an annual dividend yield of 2.8%.
Of the six analysts that have provided ratings for the stock, three rated it Buy. The consensus price target of $4.21 represents a 33.2% potential gain from its last closing price of $3.16.
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C shares rose $0.27 (+0.42%) in after-hours trading Tuesday. Year-to-date, C has gained 6.46%, versus a 23.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...
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