Financial services giant Citigroup
The company said in a prepared statement that, in response to the new tax law, it would now pay out in dividends capital formerly returned to shareholders through share buybacks. And return they do:
Div'ds Shares Paid Repurch'd Total 2002 $3,676 $5,483 $9,159 2001 3,185 3,045 6,2302000 2,654 4,066 6,7201999 1,973 3,906 5,879 1998 1,846 3,085 4,9311997 1,692 3,447 5,139
Dividends are the better deal for shareholders where a company like Citigroup appears to buy back shares regularly and without regard to whether they represent a good investment at current prices. At the same time, Citigroup deserves at least some credit: The tax change calls the bluff of those that buy back shares primarily to offset dilution and to cover up their high stock option grants. If they don't offer dividends, their fig leaf is gone.
Citigroup joins a growing list of companies, including Bank of America
If you own Citigroup and have been rewarded -- as have many investors -- more power to you. But whether holding on or considering buying, make sure you understand Citigroup's complex financial operations. If you don't, resist the dividend bribe.
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