Citigroup Buys Wachovia, Will Raise $10 Billion, Slashes Dividend
In light of
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
, which collapsed last Thursday, only to be subsequently purchased by
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
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.
Management remains committed to its takeover bid for
Longs Drug Stores
( LDG). The company is looking to break up the merger agreement with rival
. Walgreen management may go directly to shareholders with its $75 cash offer if Longs refuses to negotiate. Walgreen's buyout offer is almost 5% higher than the CVS cash offer of $71.50 per share.
We are avoiding the stock at these levels, but do think the company is going to be interesting if it can get down to the mid-$20 area. The company has a 1.37% dividend yield, based on Friday's closing stock price of $32.73.
Walgreen is not a recommended dividend stock at this time, holding a Dividend.com Rating of 3.2 out of 5 stars.
Cal-Maine Foods Shares Drop Over 20% on Big Earnings Miss
saw its first-quarter profit drop 38%, as higher feed costs took a toll on the company's results.
The company saw strong demand for eggs in both the retail and food service markets. Another potential positive that may play a role moving forward was that corn and soybean meal prices peaked in July, but have dropped substantially in the last few weeks.
Unfortunately, management believes feed prices will remain volatile and high for the year ahead.
We had removed shares from our "Recommended" list in late August, after seeing a solid run-up of 35% from our early June recommendation. We would not try to catch today's drop, but rather, let the stock settle out a bit before re-evaluating.
Cal-Maine Foods is not a recommended dividend stock at this time, holding a Dividend.com Rating of 3.4 out of 5 stars.
Anheuser-Busch Deal Takes Another Step Closer to Completion
shareholders have voted to approve the company's $52 billion takeover of
, a deal that would create the world's largest brewing company.
The combined companies will be called Anheuser-Busch InBev. The new company will also need to complete a share offering that would raise up to $10 billion to pay for part of the deal.
Inbev management is sticking to its commitment not to close or make new cutbacks at any of Bud's existing breweries.
We have liked this deal (and BUD stock) from the beginning. Despite recent economic turmoils, we think this deal will get done on schedule by year-end. We would continue to look at BUD shares in the $65 area for an opportunity to make a solid return by year-end, when the deal gets finalized at $70 per share in cash.
Anheuser Busch is a "Recommended" dividend stock, currently holding a Dividend.com rating of 3.7 out of 5 stars.
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.