Close Brothers Group offers a dividend yield of 4.5%

Aviva shares dividend

When it comes to UK banking dividend stocks, most investors focus their attention on the big boys – Lloyds, HSBC and Barclays.

However, there’s another UK bank that offers considerable dividend appeal in my view – Close Brothers Group (LON: CBG) (CBG.L).

I listed the bank here as one of my top dividend ideas for November.

Q1 trading update

Close Brothers provided a brief Q1 update today, stating that it had made a “good start to the year with continued strong profitability across all three divisions.”

The group’s banking division “delivered a good performance” with the loan book increasing 1.4%. The net interest margin and the bad debt ratio remained in line with the last financial year.

The securities arm Winterflood enjoyed continued retail investor trading activity, and the asset management division saw managed assets increase 6.5%.

The bank stated that it remains “well positioned for the remainder of the financial year.”

Share price surge

The market is clearly happy with the update, and the shares are up by 7% today.

If I’m honest, that’s a little frustrating, as with the share price under 1,350p in recent days, I have been very close to pulling the trigger and taking a position in the stock for its dividend.

Dividend Forecast 2018

Nonetheless, even after today’s 7% rise, the bank still offers value and an attractive dividend yield. The City expects a dividend payout of 63.2p per share for 2018, equating to a yield of 4.5% at the current share price of 1,400p. Dividend coverage is expected to be 2.1 times.

Strong dividend growth track record

It’s worth noting that Close Brothers has a fantastic dividend growth history and has never cut its dividend. In the last five years, the payout has grown at a compound annual growth rate (CAGR) of 7.7%.

That track record, combined with the bank’s P/E of 10.7 and attractive yield of 4.5%, makes Close Brothers an attractive dividend growth stock, in my view.

Disclosure: Edward Sheldon, CFA owns shares in Lloyds Banking Group. 

This article is provided for general information only and is not intended to be investment advice. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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