Dividends4Life: Stock Analysis: C

Stock Analysis: C

Posted by D4L | Monday, January 07, 2008 | , | 7 comments »

Linked here is a PDF copy of my analysis of Citigroup Inc. (C) (alt.1, alt.2). Below are some highlights from the above linked analysis:

Company Description: Citigroup, Inc., a multibank holding company, provides various financial services to customers in the United States and internationally.

Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description: 1.) Avg. High Yield Price, 2.) 20-Year DCF Price, 3.) Avg. P/E Price and 4.) Graham Number. Grand Slam Homerun! C is trading at a discount to ALL four valuations listed above. If I exclude the high and low valuation, and average the remaining two valuations, C is trading at an astounding 46.7% discount. C gets a Star for being fairly valued.

Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description: 1.) Rolling 4-yr Div. > 15%, 2.) Dividend Growth Rate, 3.) Years of Div. Growth, 4.) 1-Yr. > 5-Yr Growth and 5.) Payout 15% of avg. C scored a double in this section, earning 3 of the 4 available Stars, missing out only on 4.) above. Also, C failed the 5.) payout test since it's latest full-year payout % was 15 points (15%) higher than the latest 10-year average.

Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description: 1.) NPV MMA Diff. and 2.) Years to >MMA. Yet another strong performance for C. It earned the maximum two Stars available in this section.

Other: C, like most large banks, has suffered as a result of the sub-prime meltdown. I will not rehash it here today.

Conclusion: C earned one Star in the Fair Value section, a net of two Stars in the Dividend Analytical Data section and two Stars in the Dividend Income vs. MMA section for a total of Five Stars, which rates it as a 5-Star Strong Buy. Am I buying? No way, I have recently sold! I will explain why in post three of this series.

Disclaimer: As always this is only my opinion and you should not rely on it. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

Full Disclosure: At the time of this writing, I own shares of C in my IRA.

What are your thoughts on C? Are you buying, selling or holding?

This post is the first in a three part series.

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7 comments

  1. Noel Larson // January 7, 2008 at 12:05 PM

    Citi an ML both feel overly beat-down to me. I wonder in Lynch will get bought out or merge...they just see too close to book value.

  2. Anonymous // January 7, 2008 at 5:35 PM

    Nice analysis D4L. I'm at odds with you here. I am accumulating shares monthly during this beatdown and hoping they don't cut the dividend. I look forward to your reasons for selling.

  3. Anonymous // January 7, 2008 at 6:08 PM

    If there was only one method, all of our portfolios would be the same. I will give my thoughts and reasons on Wed.

    Best Wishes,
    D4L

  4. Anonymous // January 7, 2008 at 8:14 PM

    I'm also interested to hear why you sold and why you aren't buying. I'm also curious to see why you are choosing to ignore your rating system in this case even though it is indicating a strong buy. Are you speculating about a dividend cut?

    Looking forward to your next installment!

  5. Anonymous // January 7, 2008 at 9:19 PM

    It should all make sense after the final post in the series.

    Thanks for tuning it!

    Best Wishes,
    D4L

  6. Anonymous // January 8, 2008 at 5:14 PM

    I bought Citi in June right before the sky fell down. Probably not the best investment decision in my life, especially because now there's buzz that Citi may cut its dividends to cover its capital needs (not that "buzz" should be a huge factor in investing).

    My boyfriend bought Citi some time after it started its descent, thinking it will recover quickly. He sold for a significant loss, which will at least cover his gains for the year.

    I, on the other hand, still have my Citi stock. It's such a small portion of my portfolio that it's actually not hurting too much (and won't hurt too much even if its value completely disintegrates). And since I bought with plans of holding it for several years, I'm not deviating from that plan now.

    Still, I think it's completely reasonable to not buy C now. I look forward to hearing your reasons, though!

  7. Anonymous // January 8, 2008 at 8:03 PM

    Hopefully the climax will not disappoint.

    Best Wishes,
    D4L

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