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Citigroup (NYSE: C) is a large and popular bank which most investors will know because of its name recognition. But name recognition alone is no reason to buy a stock. If you are wondering whether or not Citigroup is a buy right now, here's a quick look at some key factors you'll want to consider before making your final decision.
What does Citigroup do?
Citigroup is a large, diversified bank. Its operations span from traditional consumer banking and business banking to wealth management and other markets-related services. There is a lot going on within Citigroup, but it really isn't all that different from any other large bank.
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That said, the stock has fallen around 20% from its 52-week highs. That's much worse than the decline of the S&P 500 index (SNPINDEX: ^GSPC). While the S&P 500 index is in correction territory (a decline of more than 10%), Citigroup is basically suffering through its own personal bear market (a decline of 20% or more). This disproportionate drop may have bargain-seekers interested in Citigroup.
That's not unreasonable at all, but investors should probably take a bigger-picture view of the situation. Right now, Wall Street is worried about the potential for a recession thanks to geopolitical and tariff-related issues. Although Citigroup is a very different company today than it was back during the Great Recession, that was the last lengthy difficult economic period the bank lived through. It didn't distinguish itself.
The problem with Citigroup and an alternative
Prior to the Great Recession Citigroup had followed the industry trend of jumping into the mortgage space. When the housing market collapsed Citigroup was forced to take a government bailout, and it cut its dividend to a token penny per share per quarter. The company's stock plunged, as you would expect. And, to this day, it still hasn't fully recovered. Nor has the dividend.
It seems unlikely that Citigroup will go through that same type of period this time around. However, if you are a dividend investor trying to live off of the income your portfolio generates, well, Citigroup should probably worry you. And while its dividend yield is generous at 3.3%, you can do better with a more reliable dividend payer.
The bank in question is Toronto-Dominion Bank (NYSE: TD), which hails from Canada and has a 4.8% yield. Canadian banking regulations are very tight, and that has left Canadian banks with a conservative ethos. The heavy regulation has also given large banks like TD Bank, as it is more commonly known, entrenched market positions in Canada. In other words, TD Bank has a very solid foundation. That's a good thing, because the bank has run afoul of U.S. regulators.