Citigroup, Wells Fargo, PNC: Undervalued Dividend Growers

Key Points

• Citigroup recently raised its dividend. It currently has a 4.63% yield.
• Citigroup's earnings data show consistent beats in top and bottom-line views.
• Wells Fargo's stock forms a cup-with-handle base, indicating it's approaching a potential breakout.
• Wells Fargo raised its dividend for the past three years.
• PNC shares have been trending higher since May.
• PNC Q2 earnings were down 2%, but that topped Wall Street views

If you’re exploring dividend stocks, you can adopt various strategies. You might seek out high-yield stocks, or those with consistent payouts and robust financial conditions, or companies with a track record of boosting dividends. 

Those last categories often overlap: Companies with steady histories of increasing shareholder payouts typically have steady, reliable revenue and earnings, and solid margins. 

Here’s a look at three stocks from the banking industry that are raising dividends. After getting clobbered in March, due to the crisis in regional banks, larger banks have been slowly edging their way higher. 

These stocks could also be considered undervalued, as their current prices appear to be below their intrinsic value, presenting the potential for higher returns. Intrinsic value refers to a company’s fundamental worth based on factors such as earnings, assets, and growth potential.

Citigroup Inc. NYSE: C

• Annual dividend per share: $2.12
• Dividend yield: 4.63%
• Consensus price target: $53.73
• Potential upside: 17.25%

In the past two quarters, as you can see using Citigroup earnings data, the company topped both top and bottom-line views. 

As with virtually every bank, Citigroup revenue has been growing at double-digit rates. In six of the past eight quarters, year-over-year earnings have been declining, and analysts expect net income to drop by 18% this year, before growth resumes in 2024. 

Nonetheless, the stock has been in rally mode, returning 2.98% in the past month and 4.49% in the past three months. Citigroup stock has been forming a sloppy consolidation since February. 

Citigroup analyst ratings show a consensus view of “moderate-buy.” 

The stock’s price-to-book ratio is 0.44. This ratio gauges undervaluation; a lower ratio suggests the stock has value potential. This indication, combined with analysts’ price target, suggests the stock may have some room to run, after being oversold in 2022 and early 2023. 

Citigroup recently increased its dividend for the first time since 2020. 

Wells Fargo & Co. NYSE: WFC

• Annual dividend per share: $1.40
• Dividend yield: 3.11%
• Consensus price target: $48.62
• Potential upside: 7.89%

Wells Fargo has a three-year track record of increasing its dividend. 

MarketBeat’s Wells Fargo earnings data show the bank beating net income and revenue views in the past two quarters. Earnings grew at rates between 10% and 51% in the past four quarters, while revenue grew 17% and 20% in the past two quarters. 

Wells Fargo’s price-to-book ratio is 0.45, suggesting the stock may be undervalued. 

In its second-quarter earnings report, Wells Fargo increased its forecast for full-year net interest income, or NII to 14% from 10%. 

NII reflects profitability from core lending activities, which is crucial for assessing a financial institution's earnings and stability.

Wells Fargo’s analyst ratings show a consensus view of “moderate buy.” The stock is up 4.15% in the past month and 23.09% in the past three months. A glance at the Wells Fargo chart shows the stock forming a cup-with-handle base whose current buy point would be north of $47.24.

The PNC Financial Services Group, Inc. NYSE: PNC

• Annualized dividend per share: $6.20
• Dividend Yield: 4.68%
• Consensus price target: $161.65
• Potential upside: 22.10%

PNC is considered a regional bank, as it operates primarily in the Mid-Atlantic, Midwest, and Southeastern regions of the U.S. 

It was slammed hard during the regional banking crisis, declining 19.52% in May. After it reported second-quarter results on July 18, the stock got an initial bump, and finished the month with a gain of 8.69%. 

The PNC chart shows the stock trending higher since May, as it’s been notching a series of higher weekly lows. Shares are up 4.30% in the past month and 17.05% in the past three months.

Earnings per share of $3.36 were down 2% from the year-ago quarter, but that topped Wall Street views, as MarketBeat’s PNC earnings data show. Revenue of $5.29 billion fell below views.

PNC increased its shareholder payout for the past 12 years, an excellent track record that lands it a place on MarketBeat’s Dividend Achievers list. 

That dividend payout is an attractive feature even as analysts see earnings dropping at single-digit rates this year and next.