Is the financial services corporation Citigroup Inc. (NYSE: C) a good next buy for your portfolio? If you're scouring headlines to look for an excellent bank stock that pays dividends, you might want to consider the strengths (including the choppy, storied history) of Citigroup. 

Let's take a look at the history of the third largest banking institution in the U.S., the pros and cons of purchasing the dividend-paying stock and why you might want to consider it above other banking stocks.

History of Citigroup 

One of the four banking behemoths (in addition to JPMorgan Chase, Bank of America and Wells Fargo), Citigroup's history goes back to its original charter in 1812 with $2 million in "seed money." 

It became the National City Bank of New York in 1865 and drove an overseas branch in Buenos Aires, Argentina. It also became the first major U.S. bank to offer: 

• Compound interest on savings
• Unsecured personal loans
• Checking accounts
• Certificates of deposit (CDs)

It merged with First National Bank of New York in 1955 and became City Bank in 1962 and created what was eventually known as Mastercard in 1967. The bank became Citicorp in 1974 and introduced its famous Citicard and 24-hour ATMs. It also expanded to 90 countries around the world. 

Citigroup was officially created on October 8, 1998, after a Citicorp and Travelers Group merger. 

In 2022, Citigroup Inc. provides a wide range of financial products and services to consumers, corporations and governments worldwide. The company has two segments, the Global Consumer Banking (GCB) (which handles retail banking, cards and retail services as well as banking, credit card and investment services). The Institutional Clients Group (ICG) offers: 

• Banking products and services
• Foreign exchange
• Prime brokerage
• Derivative, equity and fixed income research
• Corporate lending
• Investment banking
• Private banking

Citigroup Inc.'s Past Challenges

There's no question that Citigroup Inc. has a lot of skeletons in its closet. Here are just a few attributed to the dividend stock: 

• Citi was fined $45 million in 2000 to settle lawsuits alleging that it imposed excessive late fees on credit card customers.
• Accused of helping Enron conceal fraud in 2002.
• Citi was caught up in the WorldCom accounting scandal in 2004 and in abuses alleged by the Federal Reserve.
• Received civil penalties of $20 million for failing to provide customers with material information related to mutual fund share purchases. 
• NASD fined Citi $225,000 in 2006 for deficient disclosures in analyst reports. 
• In 2008 FINRA (the successor to NASD) fined Citi $300,000 for failing to properly supervise the commissions its brokers charged on stock and option trades.
• FINRA fined the company for transaction reporting violations and for a failure to properly supervise communications with customers and later for disclosure and supervisory violations. FINRA also fined Citi $500,000 for failing to supervise a sales assistant who misappropriated more than $700,000 in customer funds.
• FINRA fined Citi for charging excessive markups and markdowns on bond transactions, related to exchange-traded funds, providing inaccurate performance data related to subprime securitizations and for using municipal bond proceeds to pay for lobbyists.
• Citi paid $730 million in 2013 to settle a lawsuit by institutional investors due to risks the bank had regarding preferred stock and bonds between 2006 and 2008.
• Citi paid $968 million to Fannie Mae to settle claims about home loans it sold to Fannie Mae.
• In April 2014 Citigroup agreed to pay $1.13 billion to settle more claims by institutional investors who had demanded that it buy back residential mortgage-backed securities.
• Citibank was one of a group of banks pleading guilty to criminal charges of conspiring to fix foreign currency rates in 2015.
• In January 2017, the CFBP fined Citi $28.8 million for not explaining foreclosure options to clients and giving them excessive paperwork when they applied for foreclosure relief.
• The CFPB ordered Citi to pay $335 million to 1.75 million credit card customers for failing to properly adjust interest rates. 

Given this long history of challenges, you might not be interested in investing in Citigroup Inc. at all. However, take a look at the pros and cons in the next section before you make a final decision.

Learn more: 6 Best Dividend Stocks of All Time

Pros and Cons of Purchasing Citigroup Inc.

What are the pros and cons of tapping into Citigroup Inc. stock? Let's take a look. 

Pros: 

• Cheap stock: While it's not the only reason to purchase a stock, the cost is still a top consideration. At $50 as of this writing, Citi is cheaper than the other four major banks. At 6.39, its P/E ratio is lower than the other four major banks and the dividend yield of 4.08% is fairly high for dividend investors.
• Rehabilitation: Citigroup's culture and structure will undergo rehab under new CEO Jane Fraser, a potentially welcome breath of fresh air amid years of company mismanagement. 

Cons: 

• Rising interest rates: Rising interest rates could affect bank stocks, particularly if the Federal Reserve hits rate hikes too hard. Interest rate hikes historically benefit banks but the rise in rates may actually make it go the opposite direction. 
• Political and economic uncertainty: Loan volume turning to dust, credit quality decreases and downtrends in the strength of the economy: All can spell bad news for banking stocks. 
• History of mismanagement: Shareholders have also been on the short end of the stick, not just banking clients. The SEC's $75 million settlement with Citigroup back in 2010 was a result of Citigroup not informing shareholders of more than $40 billion of subprime mortgage investments. This resulted in a bailout from taxpayers. Citigroup shareholders (and taxpayers) ultimately paid the price for this major mishap. In short, Citigroup hasn't been exemplary in its past in taking care of its shareholders. However, the new CEO has plans to remake Citigroup, likely with shareholders in her sights.

Learn more: Should You Buy Dividend Stocks During Inflation?

Despite its Past Troubles, is Citigroup a Good Buy?

Citigroup should undergo a transformation due to Fraser's plans to put the company to rights. Its low price, decent dividend yield, positive turnaround plans and dividend payout ratio of 26.09% (which could continue to improve) could make Citigroup a positive play in your favor. 

Look at your goals and timeline and do your research to make sure Citigroup Inc. is a fit before you buy.