Entered a Trade to Buy More Citigroup
- 12 Comment
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:
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.
12 Comments on this post
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Dividends4Life said:
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,
D4LNovember 17th, 2007 at 6:36 pm -
The Dividend Guy said:
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
November 17th, 2007 at 7:00 pm -
Paul in Kansas City said:
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.
November 17th, 2007 at 9:15 pm -
Deborah said:
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
November 17th, 2007 at 10:53 pm -
Investing Lessons said:
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.
November 18th, 2007 at 8:30 pm -
Living Off Dividends said:
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.
November 18th, 2007 at 11:06 pm -
Living Off Dividends said:
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.
December 7th, 2007 at 11:00 am -
tim foster said:
It might go up in the long term, but in the short term i’m not so sure.
http://www.johnbeckland.com/December 28th, 2007 at 10:40 pm -
willaim said:
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October 20th, 2008 at 10:22 pm -
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http://www.naturalherbalproduct.comNovember 20th, 2008 at 12:36 am
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