Pfizer Inc. (PFE), Citigroup Inc (C): Legendary Investor Is Bullish, Should You Be?

Higher total yield and much cheaper

Citigroup Inc (NYSE:C)’s total yield of less than 1% is quite low, compared to other banking giant Bank of America Corp (NYSE:BAC). Bank of America is trading at $12.20 per share, with a total market cap of $132.40 billion. Its forward dividend yield stays at 0.3%. What makes me interested is its $5 billion share repurchase plan. The Federal Reserve has already approved Bank of America’s capital plan to spend $5 billion to buy back its shares on the market in the next twelve months. A $5 billion share repurchase could create an additional yield of 3.77% at its current trading price. Thus, Bank of America Corp (NYSE:BAC) could offer investors a total yield of more than 4% in the next twelve months.

In the first quarter 2013, Bank of America reported a 5.4% increase in revenue to $23.7 billion. The net income came in at $2.62 billion, four times higher than the net income of $653 million in the first quarter last year. The allowance for loan and lease losses reduced significantly, from $32.2 billion in Q1 2012 to $22.44 billion in Q1 2013, representing 2.49% of the total loan and leases outstanding. Bank of America seems to be quantitatively cheaper than Citigroup, as it is valued at only 60% of its total book value.

My Foolish take

I am more bullish on both Citigroup Inc (NYSE:C) and Bank of America Corp (NYSE:BAC) with its low valuation of less than their book values. Between the two banking giants, Bank of America would offer more for investors due to its lower valuation, much higher total dividend yield and decent loan loss reserves.

The article Two Recent Biggest Positions in Irving Kahn’s Portfolio originally appeared on Fool.com and is written by Anh Hoang.

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