1 Magnificent High-Yield Bank Stock Down 30% to Buy and Hold Forever
Citigroup (NYSE: C) has had a great run over the past six months, rising more than 22% over the span. That's a much better performance than the S&P 500 (SNPINDEX: ^GSPC), which has basically gone nowhere in that time. But if you are looking for a bank stock and like dividends, you'll probably prefer the 4.8%-yielding industry giant featured below over Citigroup today. Here's why.There was probably a time when Citigroup's shares were a bargain, but that time doesn't appear to be now. The stock's performance over the last six months speaks to a company that has clearly been much loved by investors, and that love has had an almost inevitable effect. For starters, the dividend yield is 3%, which is OK on an absolute basis but has to be juxtaposed against the drastic dividend cut that was made following the Great Recession. The dividend isn't anywhere near its pre-cut level, and neither is the stock price.Then there's the issue of valuation. Citigroup's price-to-sales, price-to-earnings, and price-to-book value ratios are all above their five-year averages. That comes after the stock fell sharply from its recent peaks during the market sell-off. At the worst of the decline, the shares were off by around 20%, roughly twice the drop of the S&P 500 index. The most loved stocks are often the first to be sold during periods of market uncertainty, so Citigroup's dramatic decline isn't really shocking. But it does suggest that investors should tread with caution.Continue reading
Citigroup (NYSE: C) has had a great run over the past six months, rising more than 22% over the span. That's a much better performance than the S&P 500 (SNPINDEX: ^GSPC), which has basically gone nowhere in that time. But if you are looking for a bank stock and like dividends, you'll probably prefer the 4.8%-yielding industry giant featured below over Citigroup today. Here's why.
There was probably a time when Citigroup's shares were a bargain, but that time doesn't appear to be now. The stock's performance over the last six months speaks to a company that has clearly been much loved by investors, and that love has had an almost inevitable effect. For starters, the dividend yield is 3%, which is OK on an absolute basis but has to be juxtaposed against the drastic dividend cut that was made following the Great Recession. The dividend isn't anywhere near its pre-cut level, and neither is the stock price.
Then there's the issue of valuation. Citigroup's price-to-sales, price-to-earnings, and price-to-book value ratios are all above their five-year averages. That comes after the stock fell sharply from its recent peaks during the market sell-off. At the worst of the decline, the shares were off by around 20%, roughly twice the drop of the S&P 500 index. The most loved stocks are often the first to be sold during periods of market uncertainty, so Citigroup's dramatic decline isn't really shocking. But it does suggest that investors should tread with caution.
