Buy This High-Yield Dividend Stock That Looks Set to Shine Under Trump’s Presidency

The Current Market Landscape

U.S. stocks have been on fire since Donald Trump took office, with the rally hitting fresh highs time and again. Small-cap stocks have particularly outperformed their large-cap counterparts, showcasing a robust market that is hungry for opportunities. A notable trend across various sectors is the strength of bank stocks. With the Trump administration pushing for business-friendly policies and fewer regulations, the banking sector stands poised for significant gains.

Bank Stocks to Watch

Investors are keen on the banking sector, anticipating a major uptick as regulations ease in the coming years. Trump’s administration has formed the Department of Government Efficiency (DOGE), headed by industry innovators like Elon Musk and Vivek Ramaswamy, aimed at slashing excess regulations. This is music to the ears of investors eyeing positions in high-yield dividend stocks. Major players like JPMorgan Chase (JPM), Bank of America (BAC), and Wells Fargo (WFC) all yield around 2%, while Citigroup (C) boasts an impressive yield of over 3.1%.

Why Citigroup is a Standout Option

Citi is grabbing attention not just for its dividend but also for its robust growth forecast. Analysts at Goldman Sachs predict Citigroup will grow its dividend at a CAGR of 19% from 2024 to 2026. With a blend of high yield and the potential for capital gains, Citi is positioned for notable upward momentum. However, it’s worth noting that Citi has weathered significant regulatory scrutiny in recent years.

The Regulatory Storm and Its Opportunities

Citigroup has often been under the regulatory microscope, with infamous incidents leading to hefty fines, like the $136 million penalty for not addressing data management issues last summer. Not to mention, Senator Elizabeth Warren has vocalized concerns over Citi’s risk management and compliance, urging for growth curtailments. Despite these bumps in the road, Citi is undergoing a transformation to strengthen its controls, which may increase short-term costs but positions it for long-term success.

Valuation Insights

As it stands, Citi is trading below its tangible book value—a strong indicator of its potential upside. At the end of September, the bank’s tangible book value was $89.67, while its stock was under $72. If the stock continues to close in on its intrinsic value, there’s a significant opportunity for capital appreciation. Alongside improving earnings, Citi’s book value growth is expected to drive returns, making it a compelling option for investors looking to ride the next wave of growth.

Analyst Ratings and Forecasts

Currently, among the 19 analysts covering Citi, 10 are bullish—rating it as a “strong buy”—while only one gives it a “moderate buy.” The remaining analysts categorize it as a “hold.” The consensus mean target price sits around $75.81, offering a modest upside. Still, the Street’s highest target price of $110 represents over 54% upside potential, signaling a robust growth forecast for this dynamic bank stock.

Conclusion: Timing and Strategy

As investors gear up for a possible market boom stemming from relaxed regulations, Citigroup presents a dual-threat: a juicy dividend and growth potential. While it has its internal battles with compliance, if management can get its house in order, Citi’s stock is likely to outperform its peers. This is a stock to consider packing in your trading arsenal as it has significant room to run higher, especially amidst rising valuations driven by capital gains converging with its book value.

The ball is firmly in CEO Jane Fraser’s court. Can she and her team execute on this transformation and align compliance with aggressive growth? If they can, Citi’s stock may be one of the few bright spots in your trading portfolio.