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Citigroup (NYSE:C) has attracted much controversy regarding their decision to skip or reduce the dividend. Citigroup shares trade at approximately a 7.60% yield. Normally that is a huge danger sign of more sad news coming very soon. Consider this:


The quarterly cash cost of the dividend is approximately $2.9 billion. Everyone is well aware of the dividend coverage ratio and how ugly it looks. But given the scale of the problems facing Citigroup, $2.9 billion every 90 days is not going to solve anything worth solving. A cut or outright skip will just slam the share value down some more and affect their ability to manage their capital base.

So this talk of a coming dividend reduction begs more questions than it actually solves. Financial institutions have some options that normal companies do not. Quite frankly, if the large overseas investors and onshore political operators decide its worth more, it will be worth more. They are not going to kick this one out of bed with a foolish dividend cut.

Source: Citi Investors Won't Kick This One Out of Bed with a Foolish Dividend Cut