Filed under: Citigroup Inc. (C)

With shares of Citigroup (NYSE: C) beaten down pretty badly and still looking for ways to raise capital, it should turn to the most obvious source of cash: cutting its dividend.

I know, it would send the wrong message and might cause the stock to take another hit. But if the stock is indeed undervalued, as its shareholders presumably believe it is, it’s the right thing to do.

Here’s why: By selling off bits of the company to other firms while the stock is in the basement, Citigroup is getting very little money for the amount of ownership it’s giving up. And all in the name of continuing to return cash to shareholders so that they can pay a tax on it? It makes no sense at all.

According to Forbes, “A Citigroup spokesman wouldn’t comment on the dividend speculation, saying it is a matter for the board of directors. On Nov. 4, a statement by the company said there were no plans to reduce the current dividend level.”

Citigroup’s institutional shareholders should be pleading with the company to cut the dividend. If they think the stock is going to rebound, why would they want the board and management selling it off to overseas firms for a fraction of its long-term value?

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This entry was posted on Friday, January 11th, 2008 at 2:53 pm and is filed under Stocks Money News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.