In a very interesting turn of events we are now 36% owners of one the biggest banks in the US.
Besides a stronger capital base, the company is getting a critical boost to its cash flow as it forgoes its 4 cent annual dividend on its common shares. That is giving Citi an additional $2.18 billion a year. The bank will also no longer pay the 5 percent dividend it owed on the government's preferred shares that have converted to common stock.
So now we are long this ailing bank but without a 5% dividend cushion to protect our money. I guess we had to make this deal because of Senator Dodd's incompetence when he came to sticking things into the Stimulus Bill at the last minute. Oh well, our brand new Citigroup stake just dropped 39% in one trade day. With investment managers like the US Government who needs mutual funds?