Citigroup (C 1.25%) is one of the best-known banks in the United States and probably the world. But it doesn't have the best history when it comes to dealing with adversity, given its less-than-impressive performance during the Great Recession.
Even though it is a much different company today than it was back then, investors can probably do better. Here's why and how.
What does Citigroup do?
Citigroup is a bank, providing basic financial services to consumers and businesses. This is the core of its business. However, it also operates in the investment banking, wealth management, and markets spaces. The business is not significantly different from any of its largest peers, though it is important to note that Citigroup is more than just a simple bank.
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That said, it is just as important to take a little historical journey with Citigroup. That's because it allowed itself to get caught up in the housing market meltdown that happened during the Great Recession. It was forced to take a government bailout, and it cut its dividend. Neither the share price nor the dividend are back to the levels seen prior to the Great Recession. So nearly 15 years after the event, shareholders are still deeply underwater.
To be fair, Citigroup is not the same company it was back then. It is more financially secure and is being operated more prudently. And yet the stock price has bumped repeatedly up against the $76 or so price level over the past decade only to fall back lower. With the stock price back up near that level, should investors buy on the hope that it will break through what appears to be an emotionally-driven price cap?
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There are better options than Citigroup
The first concern that investors should probably have right now is related to the U.S. economy. There are legitimate worries that current tariff and tax policies could lead to a period of weakness. If that includes a recession, Citigroup stock will probably head lower again. That said, it seems unlikely that a recession will have the same impact on the business as did the Great Recession. So this risk is legitimate, but probably not something that should stop you from buying Citigroup in and of itself.
That's where another important factor comes up -- the dividend. Citigroup currently offers a yield of around 3%. The average bank is yielding around 2.7%. That's a clear yield advantage, but you can actually do better if you buy Toronto-Dominion Bank (TD 0.42%) and its 4.4% yield. Given that one of the key reasons to buy Citigroup is the dividend, this is an important comparison to consider.
One big difference between these two equally large North American banks is that TD Bank, as it is more commonly known, didn't cut its dividend during the Great Recession. That's because Canadian banks like TD Bank face more rigid regulations in their home market and, thus, tend to operate with more conservative business models. And that is an important fact to consider today because TD Bank is suffering through a self-imposed wound.
TD bank's U.S. business was used to launder money. It paid a large fine, is working to upgrade its internal controls, and is under an asset cap until regulators are happy with the new controls. Its core Canadian business is unaffected by the asset cap (which effectively means the U.S. business can't grow until the cap is lifted) but overall growth will be slower for a few years than it has been historically. The U.S. business was expected to be TD Bank's growth engine. This is not good news, but it will likely pass in time.
And that's the opportunity because investors have reacted by dumping TD Bank's stock. This has pushed the yield up toward historical highs and created a long-term opportunity for dividend investors (and turnaround investors). Investors can take comfort in the fact that, despite the headwinds, TD Bank increased its dividend yet again at the start of 2025. It was a modest hike, but the point of the increase was to signal that the bank was down, but not out.
Even Citibank below $76 isn't as compelling as TD Bank
There's nothing inherently wrong with Citigroup. Investors probably wouldn't be making a huge mistake to buy it even as it bounces up against a stock price ceiling it has hit several times before. But with a yield of around 3%, investors can do much better with TD Bank and its 4.4% yield and turnaround potential as it recovers from a self-inflicted wound. While economic concerns will impact both of these large banks, TD Bank appears to offer more opportunity for income and capital appreciation today.
