Citigroup Inc (C): Speculative Megabank Or Future Dividend Growth Machine?

Citigroup Inc (NYSE:C) more than tripled its quarterly dividend earlier this year, but few people can forget the terror of the 2008-2009 financial crisis. Unlike our favorite recession-resistant dividend stocks, some of the world’s largest financial institutions were on the brink of utter collapse and threatened to plunge the global economy into a prolonged depression.

Citigroup was among the largest of the mega-banks to require a government bailout, with the US government pumping $45 billion into the bank in order to cover losses on $301 billion in toxic mortgage assets.

However, since that time new regulations and a new management team at Citigroup have made an impressive, if still incomplete turnaround. This could create potential for long-term, deep value dividend investors building their portfolios to get in on the ground floor of what could become a great, if still risky, dividend growth stock.

Let’s take a look at Citigroup’s business and, more importantly, what changes management has made to ensure that one of the world’s largest banks never comes close to wiping out both the global economy, and shareholders, again.

Business Description

Citigroup is America’s 4th largest bank, but the smallest of the four megabanks, which include JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Co (NYSE:WFC), and Bank of America Corp (NYSE:BAC). It operates in over 160 countries, serves over 200 million retail customers, is the world’s largest issuer of credit cards, and is one of the largest banks in the world with almost $1.4 trillion in total assets.

Citigroup’s business can be broken down into three segments:

North American Consumer Banking

Retail banking and credit cards:

Q3 2016 % of total sales: 26.2%

Q3 2016 % of total net income: 25.2%

International Consumer Banking

Retail banking and credit cards outside North America:

Q3 2016 % of total sales: 17.3%

Q3 2016 % of total net income: 14.2%

Institutional Clients Group

Institutional asset management, investment banking, corporate lending, and stock and bond trading:

Q3 2016 % of total sales: 45.1%

Q3 2016 % of total net income: 53.7%