Citigroup (C) cuts dividend 41%, but I still expect overall growth

The potential for a large dividend cut by C, the third largest payer in the S&P 500 at $10.8B, has been known and discussed for months. Today’s 40.7% dividend reduction (from quarterly $0.54 to $0.32) by C, reduced its yield from 7.4% (8th highest) to 4.4% (43rd highest), shaved $0.50 (1.75% of the payment) off the S&P 500 dividend rate, and reduce the overall S&P 500 yield from 2.02% to 1.99%. C is now the 6th largest payer ($6.4B), with the Financial sectors dividend contribution being reduced from 29.10% to 27.84% (it was 29.72% in June of 2007). The tendency for index issues to pay and increase their cash dividends is much greater than that of the general market, with 77.8% of the S&P 500 constituents paying cash dividends versus 38.7% for the non-S&P 500 companies. For 2007, over 60% of the S&P 500 increased their dividend payout compared to less than 28% for the non-S&P 500 companies.

To continue reading this article you must be a Bloomberg Professional Service Subscriber.