Citigroup Planning Reverse Stock Split
The recent rash of creative financial accounting continued Thursday, as embattled banker
said it is planning a reverse stock split, which would at least temporarily boost the company's floundering stock price.
Two weeks ago, Citigroup shares "broke the buck," sliding under the $1 per share level. Since then, the stock has more than tripled after the company said in an internal memo that it turned a profit, excluding write-downs and other items, in January and February of this year.
Citigroup is planning to swap common stock for up to $27.5 billion of its preferred shares, priced at $3.25 per share. The U.S. federal government would match up to $25 billion of the proposed exchange.
Citigroup said it will also seek shareholder approval to perform a reverse stock split, while considering seven possible exchange ratios. These ratios cover a giant range, from a tiny 1-for-2 split all the way up to an enormous 1-for-30 split. The company said the split could happen before June 30, 2010.
Citigroup currently has 5.5 billion shares outstanding, and the proposed exchange could increase the number of shares to between 13 billion and 21 billion, depending upon how many investors buy into the program.
Companies often use reverse stock splits like these to boost very low share prices, albeit temporarily.
Citigroup has so far accepted about $45 billion from the government's Troubled Assets Relief Program, and has lost around $37.5 billion in the last five fiscal quarters.
More of the fancy footwork coming from the Citigroup team that has been there through the majority of the financial "minestrone". Reverse stock splits do not change the fundamentals of anything. It's just a change in the numbers and nothing else. We would still be extremely cautious with the shares here.
Citigroup is not recommended at this time, holding a Dividend.com Rating of 2.3 out of 5 stars.
Ross Stores Fourth-Quarter Sales Rise as Profit Meets Street
said Thursday that its fourth-quarter sales rose 5% year over year, as the discount clothing retailer reported a quarterly profit that equaled analyst expectations.
The Pleasanton, Calif.-based company reported fiscal fourth-quarter net income rose 3% to $97.4 million, or 76 cents per share, compared to $94.5 million, or 70 cents per share, in the year-ago period. These latest results equaled average Wall Street analyst expectations of 76 cents per share.
Sales in the quarter rose 5% from the year-ago period, to $1.73 billion.
Ross, which sells name-brand clothing and home goods at discounted prices, has seemingly benefited from the economic slowdown, as cost-conscious consumers continue to seek out bargains on everyday items. Ross purchases off-season, overstock and discontinued products from manufacturers at well below wholesale prices, and passes on the savings to shoppers in its stores.
Ross shares were up more than 4% in premarket trading Thursday, but much of those gains were erased by mid-morning.
We removed shares of Ross Stores from our "Recommended" list back on Oct. 2, when shares were trading at $36.49. The company has a dividend yield of 1.29%, based on last night's closing stock price of $34.10. The stock has technical support in the $25 to $26 price area. If the shares can firm up here and continue its recent momentum, we see overhead resistance around the $36 to $38 level. We would remain on the sidelines for now.
Ross Stores is not recommended at this time, holding a Dividend.com Rating of 3.2 out of 5 stars.
S&P Lowers 3M's Credit Rating, but Upgrades Outlook to 'Stable'
Credit ratings agency Standard & Poor's lowered its corporate credit and senior unsecured ratings for
Wednesday to "AA-" from "AA."
However, S&P affirmed its "A-1+" short-term credit rating for the conglomerate, and adjusted its outlook for 3M to "Stable."
3M recently issued about $1.7 billion in debt in order to increase liquidity.
S&P credit analyst Philip Schrank remarked, "The downgrade reflects a decline in still very strong debt-protection measures as a result of the weakened global economic environment that has trimmed EBITDA levels along with rising debt levels."
After initially bouncing on the downgrade news, 3M shares were down more than $1 or 2%, in morning trading Thursday.
We had removed shares of 3M from our "Recommended" list on Sept. 29, when shares traded at $69.45. The company has a dividend yield of 4.15%, based on last night's closing stock price of $49.20.
The stock is sitting right near technical support levels in the $50 to $51 price area. If this fails to hold, we could potentially see a test of the $38 to $42 price area. If the shares can firm up, we see overhead resistance around the $66 level. We would remain on the sidelines for now.
3M is not recommended at this time, holding a Dividend.com Rating of 3.3 out of 5 stars.
Discover Financial Loan Provisions Rise 113%, Cuts Dividend
Discover Financial Services
were down 3% in early trading, after the company reported provision for loan losses in the quarter increased $707 million, or 113% from the prior year.
The company said this was a result of higher net charge-offs and the addition of $504 million loan loss reserves in excess of charge-offs in the quarter.
The company also announced it was cutting its quarterly dividend to 2 cents from 6 cents, as it look s to stabilize its capital position.
We have avoided shares of Discover Financial since our early June coverage, when the stock was trading at $15.70. The company will now have a 1.1% dividend yield, based on the lower dividend payout and last night's closing stock price of $7.29. The stock has technical support around the $5 level. If the shares can firm up, we see overhead resistance around the $10 to $12 price mark. We would remain on the sidelines for now.
Discover Financial Services is not recommended at this time, holding a Dividend.com Rating of 2.6 out of 5 stars.
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At the time of publication, the author had no positions in stocks mentioned, although positions may change at any time.
Tom Reese and Paul Rubillo are senior editors of Dividend.com. Visit Dividend.com for more dividend stock ratings, picks, news, and analysis for long-term and income-seeking investors.