Citigroup Buys Wachovia, Will Raise $10 Billion, Slashes Dividend
In light of Citigroup (C - Get Report) buying Wachovia's (WB) banking subsidiaries, Citigroup is expecting to raise $10 billion in common equity and cut its quarterly dividend to 16 cents a share, effective immediately.
Following completion of the acquisition, Citigroup will have more than $600 billion in deposits in the U.S., about a 9.8% market share. Total deposits worldwide will be $1.3 trillion. Compare that to Japan's Bank of Tokyo Mitsubishi USJ, which alone has $1.1 trillion in deposits. As of 2004, Japan had $5.3 trillion in deposits, which is slightly below what we have in the U.S. as of today.
For the record, the FDIC noted that Wachovia did not qualify as a "failed" bank, unlike Washington Mutual, which collapsed last Thursday, only to be subsequently purchased by JPMorgan Chase (JPM) buying .The banking consolidation continues, and we would avoid Citigroup at this point. The company will now have a dividend yield (based on today's cut) of 3.18%, based on Friday's closing stock price of $20.18. This huge dividend cut should serve as a reminder for investors out there: Watch out for high-yielding dividend traps in this market. In fact, we called Citigroup a dividend trap two weeks ago. Citigroup is not a recommended dividend stock at this time, holding a Dividend.com Rating of 3.0 out of 5 stars. Walgreen Reports Earnings Miss, Hits New 52-Week Low Walgreen (WAG) reported a 5-cent miss in its earnings per share today, as the company reported a revenue rise of 8.8% to $14.6 billion. Same-store sales rose 2.6%, while prescription sales rose 7.9%, which incidentally made up 66% of sales in the quarter.