Why Citigroup Isn't Raising Its Dividend Right Now
For a good chunk of last year, the Federal Reserve banned share repurchases and put limits on dividend payouts in order to ensure that banks had plenty of capital to navigate through the uncertainties presented by the coronavirus pandemic. So, naturally, once those restrictions were lifted on June 30, most large banks announced their intentions to raise their dividends and ramp up share repurchases.
Citigroup (NYSE: C) was the only major bank not to announce a dividend increase. That was disappointing to the broader market, but the bank does appear to have a good reason for its decision.
Banks return capital to shareholders in two main ways: dividends and share repurchases. But right now Citigroup is in a position where share repurchases will maximize returns to investors. Last year, Citigroup ran into regulatory issues that included a $400 million consent order. The fine also came with consent orders from the U.S. Office of the Comptroller of the Currency, which regulates national banks, and the Federal Reserve, instructing Citigroup to improve its internal risks and controls. That, along with other troubles experienced during the pandemic, sent shares plummeting.
Source Fool.com
