Citi Dividend Returning Sooner Than Expected (C, JPM, WFC)

Any time you have a shareholder talking up a company, you have to understand that they are talking up their book.  Billionaires do this, and they tend to be listened to more than others when it comes to money.  After the close of trading on CNBC, Maria Bartoromo interviewed Prince Alwaleed bin Talal of Saudi Arabia.

The prince is a very long-term investor in Citigroup Inc. (NYSE: C).  He is also apparently its largest holder.  This evening he noted that he expects Citi to begin returning capital to shareholders soon.  The stress tests should be finished in March and the prince said is pushing for a dividend hike.  He even noted that he held a conversation with Citigroup CEO Vikram Pandit late last week and his opinion is that the new Citi is doing very well. 

Citi is one of the ‘too big to fail’ banks and it has paid only a one-cent dividend since it has gotten out from the TARP.  After a 1-for-10 reverse stock split, many investors have moved on.  The adjusted dividend back in 2007 was $5.40, but it is going to be quite some time before investors expect that to remain.

Thomson Reuters is predicting that Citi will have normalized earnings at $4.04 EPS in 2012 and $4.70 EPS in 2013.  If the bank is ever allowed to return 40% of its normalized earnings, Citi could pay out $1.60 or so per share in annualized dividends.  That is a big if, but at $33.30 it would generate a dividend yield of 4.8%.

Again, that IF is a really big ‘if’ based on the regulatory climate of today.  The one bank that is expected to be among the very first to raise the common stock dividend is J.P. Morgan Chase & Co. (NYSE: JPM).  Its $0.25 per quarter dividend used to be $0.38 per quarter before the bubble burst.  We also expect a higher dividend coming down the pipe from Wells Fargo & Co. (NYSE: WFC) as its $0.12 per quarter dividend compares to $0.34 before the bubble burst.

JON C. OGG