Entered a Trade to Buy More Citigroup

Written by The Dividend Guy on November 17, 2007

Based on all the recent market turmoil with the financial stocks, my recent analysis of Citigroup and the value I believe it presents based on historical dividend yields and P/E ratios, I have just entered a trade to buy more Citigroup.

Since I use the CSA as my broker, the trades are not immediate. They pool all the trades from their clients and as such, I will make the purchase on November 27th. That seems like a while away, but I don’t think we will see too much of a rise between now and then. Given that my cost basis on the stock is about $47, it has a long way to go before I am paying more than that.

My primary reason for buying is the 6.4% dividend yield in relation to its historical yield. The 10 year average yield is 2.3% which puts this stock as way undervalued. In addition, with a dividend increase profile that looks like this I am encouraged that the increasing dividends will provide some downside protection:

Citigroup - Dividends

I have written before that it is not a good idea to chase yield and I realize that this is a bit of risky move as we are unsure about what the true impacts to performance the current crisis may/will have. However, with a payout ratio of 56% it is still covered well and my long-term focus should allow me to weather this storm for another 25+ years.


Recommended: ING DIRECT makes $aving money simple! Open your account online today and start earning 3.00% variable APY. No Fees and No Minimums!

del.icio.us| Digg| Furl| Reddit| Google| StumbleUpon| Technorati| Help|

11 Comments so far

  1. Dividends4Life November 17, 2007 6:36 pm

    TDG: How stable do you think the dividend is? I have read some articles that believe that C will have to cut its dividend, sell off some assets or both. I had a stop-loss that went off at $38.32 on 11/1/2007, so I will have to wait 30 days to avoid a wash sale. If I can get comfortable with C’s long-term dividend prospects, I would love to get back in below the $38.32.

    Best Wishes,
    D4L

  2. The Dividend Guy November 17, 2007 7:00 pm

    Hey D4L - I have read those articles as well as some that it won’t cut its dividend. I think the next few years are going to be rocky, but given my long term time frame, I am comfortable with the risk.

    TDG

  3. Paul in Kansas City November 17, 2007 9:15 pm

    I think any current shareholders would want the dividend lowered. THe problem with the balance sheet the potential additional write down risk of assets from structured investment vehicles; i believe C is too big to fail but an equity dilution is not a 0% risk. Building capital to prevent equity dilution should be seriously considered by the board. I think Bob Rubin can navigate this; but can anyone from reading the SEC filing quantify potential write-down? I would try to do that to give you clues on when to average down to lower cost basis.

  4. Deborah November 17, 2007 10:53 pm

    Good luck with this one…

    I’d be checking further into the latest news about the off balance sheet arrangements that require Citibank to buy back the subprime mortgage junk should a buyer not be found.

    The link below is a very good blog.

    http://globaleconomicanalysis.blogspot.com/2007/11/citigroup-fighting-for-its-financial.html

  5. Investing Lessons November 18, 2007 8:30 pm

    Long-term prospects for Citi are contingent on how Citi evolves as a company. Will they break it up? Will leadership be able to consolidate where Chuck Prince tried and could not? Agree there is potential in Citi but unsure how that potential will get realized.

  6. Living Off Dividends November 18, 2007 11:06 pm

    I just closed my long C position I had via options. take a big hit on it. it might go up in the long term, but in the short term i’m not so sure.

  7. November Dividend Portfolio Review November 25, 2007 2:15 pm

    […] +) so I see this as some short-term pain and have recently entered a buy order to purchase more Citigroup given the recent share price annihilation. I still am focused on bringing my banking exposure down […]

  8. Weekly Dividend Investing Roundup - December 7, 2007 Edition » The Dividend Guy Blog December 7, 2007 9:27 am

    […] may be tempting, but be careful. Fannie Mae has just cut its dividend. I recently bought some Citigroup and don’t want them to do […]

  9. Living Off Dividends December 7, 2007 11:00 am

    Would you buy a stock who’s market cap had been cut 40% this, who had suffered staggering losses, whose management borrowed money at 1.25% over junk bond rates to pay the dividend?

    If so then Citigroup is a stock for you!

    Serious, right now maybe a good time to buy. Things can’t really get much worse from here.

  10. tim foster December 28, 2007 10:40 pm

    It might go up in the long term, but in the short term i’m not so sure.
    http://www.johnbeckland.com/

  11. Prosolution April 8, 2008 11:14 pm

    I am Very thank full the owner of this blog. Becouse of this blog is very imformative for me.. And I ask u some thiing You make more this type blog where we can get more knowledge.

POST A COMMENT

If you would like to make a comment, please fill out the form below.

Name - (Required)

Email - (Required but not published)

Website - (Optional)

ENTER YOUR COMMENTS BELOW






Student Loan

www.financialwebring.com