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Citigroup Buys Wachovia, Will Raise $10 Billion, Slashes Dividend

In light of Citigroup (C - Get Report) buying Wachovia's (WB - Get Report) 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 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.
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