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By Sarah Ryan

In March, the Federal Reserve allowed six of the U.S.’s largest banks to increase their dividends for the first time since the financial crisis, but Citigroup (NYSE:C) has decided it would reinstate its dividend at $0.01 in early May and do a reverse stock split. This move will lower Citigroup’s number of shares from 29 billion to 2.9 billion, and the move should raise its stock price to $44 a share rather than its current price, which at last trade was $4.47 and has a 52-week high of $5.15.

What does this mean for Citigroup? A couple of things. While the company is still undergoing a facelift and still has serious problems to deal with, the new share price should cause institutional investors to take note and invest. Many larger players have shied away from the stock, and low priced stocks in general, because of the tiny price tag. But on the other side of the coin, Citigroup has also been a the whipping boy for short sellers of late. So with its higher price, shorts could pile on even more because of the prospect of a larger downside.

Regardless, as Citigroup attempts to climb out of the single digits and remove its “penny stock” image, Investment Underground took a look at the health of other major banks, including many who chose to raise dividends.

Bank of America (NYSE:BAC): In March, the Federal Reserve rejected Bank of America’s plan for a higher dividend. But some analysts feel that Bank of America still may have a shot at increasing its dividend later in the year, if it makes significant strides in improving its consumer/mortgage lending operations. Bank of America’s current forward dividend yield is 0.30%. Still struggling from liabilities relating to Countrywide, Bank of America needs to strengthen its capital base and clean up its mortgage issues as it continues its recovery. At last trade, Bank of America’s stock price was $13.47 and its forward P/E is 7.24.

We think the Bank of America remains bloated, with nearly 5,900 retail banking offices to serve its approximately 57 million consumers and businesses. As the banking sector rebounds from 2008 lows, we believe Bank of America will lag behind competitors like Wells Fargo and Suntrust.

Wells Fargo (NYSE:WFC): Wells Fargo recently declared a special cash dividend of $0.07 per share, bringing its first quarter dividend to $0.12 a share. The bank also announced that it will repurchase 200 million additional shares, a step that will actually lift earnings per share. In another attempt to move forward, Wells Fargo has agreed to pay $11.2 million in a SEC settlement relating to CDO sales made by Wachovia—a 2008 acquisition of Wells Fargo. The SEC states much of this money will be returned to investors. Lingering issues with Wachovia aside, with a current stock price of $31.99—which is around where the price stood in early 2008—Wells Fargo is looking relatively healthy in contrast to the competition.

We think shares are worth $34 per share on a discounted cash flow basis. We use a 10% discount rate for the company. As we noted recently, value investors David Tepper and John Paulson are also shareholders.

SunTrust Bank (NYSE:STI): Catching up to most major banks who repaid their bailout money in 2009, as of March 31, 2011, SunTrust Bank has paid back the $4.85 billion the government gave them in 2008. At last trade, the current stock price was $29.21, a bit below the 50-day moving average of 29.64 but above the 200-day moving average of 27.81. SunTrust’s forward P/E is 12.48 and current forward dividend yield is 0.10%.

Analysts expect SunTrust to be able to make dividend increases in the second or third quarter of 2011.

JP Morgan Chase (NYSE:JPM): Also authorized by the Federal Reserve to boost its dividend, JP Morgan Chase has raised its dividend to $0.25 a share, a $0.20 increase. The bank also authorized a stock buyback of $15 billion. Almost $8 billion of that buyback should occur this year.

JP Morgan is also reportedly currently in talks with the SEC to settle regarding its CDO sales leading up to the financial crisis. With a current stock price of $46.80, JP Morgan is trading near its 52-week high of $48.36 reached on February 16, 2011, and above both its 50- and 200-day moving averages ($46.01 and $42.27, respectively). This is another bank looking well on the rebound. As we wrote about here, JPM is one of our favorite banks outdoing its peers.

BB&T Corporation (NYSE:BBT): BB&T raised its dividend in March to $0.16, up $0.01 from its previous dividend after receiving the Federal Reserve’s approval. The bank will also pay a special one-time dividend of $0.01. BB&T has yet to begin share buybacks, and reports say the bank will only look into this after other options are explored. At last trade, BB&T’s stock price was $27.30, right around its 50-day moving average of 27.29. BB&T's forward P/E is 10.63. Analysts believe that BB&T will stay healthy enough to continue raising dividends and making acquisitions.

American Express Company (NYSE:AXP): American Express is maintaining its dividend of $0.18, which it has held since the first quarter of 2008. This puts American Express’s current forward dividend yield at 1.60%. However, with the approval of the Federal Reserve, American Express has announced that it will begin repurchasing stock on a large scale, which is a positive sign for the company. At last trade, American Express’s stock price was $45.91, above its 50-day moving average of 44.59, though below the 52-week high it hit in November 2010 of 59.63. The company’s forward P/E is 11.22.

Goldman Sachs (NYSE:GS): Goldman Sachs announced its intention to pay back Warren Buffett his $5 billion investment made during the financial crisis after receiving the go-ahead from the Federal Reserve, which reflects positively on the bank’s balance sheets. The repayment of this investment is large step forward for Goldman Sachs in this time of recovery. Goldman Sachs’s stock was at $159.93 at last trade, which is below both its 50-day moving average of 161.25 and its 200-day moving average of 161.82. Goldman’s current forward dividend yield is 0.90% and its forward P/E is 8.51.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.