Citigroup is scheduled to announce fourth quarter financial results on Tuesday morning. Analysts are projecting a loss of almost a dollar per share. Investors are keen to hear how much more mortgage-related writedowns there will be. As for the dividend, they are no longer wondering if it will be cut. The only question left is by how much.
The board of directors is reportedly meeting on Monday. You can bet the dividend will be a high-priority topic of discussion. Although company officials have said a number of times that the dividend is safe, no one believes this anymore. Cutting the dividend is the surest way to preserve capital. And you can bet the new investors from Abu-Dhabi will insist upon it.
Citigroup has a long history of consistent dividend increases. Yet management knows that the company can save almost $11 billion in one year alone by eliminating the dividend entirely. It can save $1 billion simply by taking back the 10% increase implemented just one year ago. Management also knows that investors are expecting a dividend cut, so it's an easy thing for them to do. The consensus is calling for a 50% reduction. If that turns out to be the case, the stock may stage a bit of a rally. However, a cut of less than 50% should cause the stock to surge.
