Street Fear: Q1 Bank Earns, Dividend Cuts
I said yesterday that the Street was already talking about first-quarter bank earnings, and specifically about who might cut their dividends.
Today, Meredith Whitney at Oppenheimer argued the same point: With a current average yield of 5.9 percent (the second highest of any year since 1990) the banks "are dangerously approaching earnings levels that simply will not support such high relative payouts."
As an example, she points to Citigroup .
She estimates Citigroup will earn $1.43 per share SHORT of its dividend payment this year. In other words, Citi will pay out $1.43 per share more than it earns this year. That is clearly untenable, and while they are attempting to sell assets, they are not going to use those sales to continue to pay dividends.
She expects Citi, Wachovia Bank and others to announce dividend cuts in April.
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