Sorry Citi Shareholders, No Dividend for You

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Citigroup  (NYSE: C  ) buried the lede.

On slide 14 of a 14-slide presentation that Citi provided for its shareholders after the release of the Dodd-Frank stress tests, the bank revealed that it did not ask the Federal Reserve to let it raise its dividend beyond the token $0.01-per-quarter level. Citi is looking to initiate share buybacks, but only enough to, as the company put it, "offset estimated dilution created by annual incentive compensation grants."

I'm not so sure that Citi investors should be disappointed about this, though. Earlier today, I pointed out that this is Mike Corbat's first go-round with the process as CEO of Citi, and asking for too much would've caused more trouble than it was worth. If he can successfully put the company back on a healthy growth path, the dividends will come, in time. If you're planning to be a long-term Citi investor, you're going to have to have patience one way or another.

If you put the dividend aside, there is good reason for Citi investors to be fired up following the stress-test results. The bank's stress-test minimum level of tier 1 common capital came in at the high end of the big-four banks: Citi, Bank of America  (NYSE: BAC  ) , JPMorgan  (NYSE: JPM  ) , and Wells Fargo  (NYSE: WFC  ) .

Source: Federal Reserve.

So, we could say that not only did Citi pass the Dodd-Frank portion of the stress tests, but it passed with flying colors. 

As we look ahead to the results next week from the Fed's Comprehensive Capital Analysis and Review (CCAR), there seems little chance that Citi will fail that either, particularly considering its meager capital-return request. On the one hand, that's a positive -- repeating the slip-up from last year's stress tests would be far from ideal -- but the fact that the company's request is so low could be concerning. My view, though, is that this is likely just Corbat erring on the side of conservatism. Being so new in the job, there seems little reason to swing for the fences now.

Of course, speaking of Corbat being new at the job ... One really interesting question that Citi shareholders could be asking themselves right now is whether they should be thanking Corbat or former CEO Vik Pandit for the capital position that the bank currently finds itself in.

Digging deeper on Citi
In light of these stress test results, the low valuation on Citi's stock looks even more tantalizing  Should investors be treading carefully, or jumping on an opportunity to buy? To help figure out whether Citigroup deserves a spot on your watchlist, I invite you to read our premium research report on the bank today. We'll fill you in on both reasons to buy and reasons to sell Citigroup, and what areas that Citigroup investors need to watch going forward. Click here now for instant access to our best expert's take on Citigroup.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2461529, ~/Articles/ArticleHandler.aspx, 9/30/2016 4:21:02 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,308.15 164.70 0.91%
S&P 500 2,168.27 17.14 0.80%
NASD 5,312.00 42.85 0.81%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/30/2016 4:00 PM
C $47.23 Up +1.43 +3.12%
Citigroup CAPS Rating: ***
BAC $15.65 Up +0.49 +3.23%
Bank of America CAPS Rating: ****
JPM $66.59 Up +0.94 +1.43%
JPMorgan Chase CAPS Rating: ****
WFC $44.28 Down -0.09 -0.20%
Wells Fargo CAPS Rating: ****