Citizens Financial Group (CFG) raised its dividend at the end of July giving it a 4.52% dividend yield. Along with its low price-to-earnings multiple, the stock seems to be attracting value investors.

The Rhode Island-based bank group now trades for just 7.9 times earnings forecasts of $4.68 per share for this year. In addition, 16 analysts project 11% higher earnings next year at $5.19, lowering its forward multiple to just 7.1x.

Recent Dividend Hike is Affordable

In addition, on July 19, the financial group raised its quarterly dividend to 42 cents per share, up 3 cents or 7.7% from 39 cents. Not only is that a sign that the bank's board is highly confident in its future earning power, but it raises the annual dividend yield to 4.52%. This is based on an annual dividend rate of $1.68, divided by its price on Sept. 19 of $37.14.

This also shows that the dividend payment will take up only 36% of its forecast earnings of $4.68 this year. That makes the dividend easily affordable for the company. 

For example, even if there is a severe recession next year and earnings tumble 25% to $3.51, the dividend rate will still be just slightly over half of the earnings (i.e., $1.68/$3.51=54%). 

Where This Leaves Investors in CFG Stock

In the last 4 years, Citizens Financial Group has had an average dividend yield of 4.0%, according to Seeking Alpha. This implies that CFG stock could still rise over 13% just to reach an average dividend yield. 

For example, if we divide the annual dividend rate of $1.68 by 4.0%, the result is $42.00 per share, which is 13% higher than today's price of $37.14. 

That does not mean that the stock might not fall from here. For example, if there is going to be a severe recession next year then all bets are off. But investors seem to be discounting that possibility.

For example, its tangible book value per share (TBVPS), after deducting all intangible assets, is $28.72 per share, as of June 30. This was down over 5% from the prior quarter's $30.32 TBVPS. The bank has to write down loans on its balance sheet that are non-performing. This could continue to occur over the next several quarters if economic growth or housing values start to falter.

However, the stock price, at $37.14, trades for 1.29x this TBVPS. This implies that investors are not too concerned that the bank's balance sheet will significantly deteriorate from here. For example, if it was trading below TBVPS, the market would be assuming that its book value would continue to fall.

As a result, given its high yield, low P/E, and good price-to-TBVPS, CFG stock is attracting value investors. The stock is off over 24% YTD and might be seen as near a low, bargain entry point.