Citigroup to resume dividend after a reverse stock split

Citigroup Inc. will resume paying a nominal dividend after it uses a reverse stock split to shrink the number of shares outstanding, taking a small step in its recovery from the financial crisis.

Citigroup will pay a quarterly dividend of a penny a share, its first payout since 2009.

But the bank’s shares dropped Monday, in part because it remains behind rivals like JPMorgan Chase & Co., and Wells Fargo & Co. Those banks Friday received regulatory authorization to increase their dividends as much as 20 cents a share and buy back stock.

“It’s almost like somebody said, ‘Hey, we’ve got all of our big brothers doing something about the dividend and buybacks. We’ve got to do something to make ourselves look at least somewhat attractive,’ ” said Matt McCormick, a portfolio manager at Bahl & Gaynor Investment Counsel Inc., a Cincinnati firm that specializes in dividend-paying stocks.

Citigroup is the most actively traded stock in the United States, and a lower share count would reduce U.S. equity trading volume substantially, agency brokerage Rosenblatt Securities said.

The bank’s shares Monday closed down 7 cents at $4.43.

Citigroup said it will reduce the number of common shares outstanding to 2.9 billion from 29 billion through a 1-for-10 reverse stock split.

The dividends it will pay out amount to about $116 million a year, or about 1% of its full-year 2010 net income. In 2006 the bank paid out $10 billion in dividends, or about 45% of its full-year earnings.