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Monday, August 8, 2022

Dividend flood: 6,000 million euros this summer

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The months of June and especially July are typical months for dividend payments. Even during the years of the Covid crisis, many listed companies tried to maintain the level and rewarded their shareholders on these dates.

Although most listed companies have regained their pre-Covid shareholder policies, there are still sectors that can no longer afford these payments as a new recession threat looms on the horizon. Amid the uncertainty, the key to this year’s improvement in shareholder remuneration lies primarily in the important contribution of the banking sector following the ECB-imposed lockdown amid the Covid crisis, which was lifted in October 2021.

Two years into the crisis caused by the pandemic, and with the risk of recession still having an impact on earnings forecasts, listed companies are looking to bring back their shareholder compensation policies, and most of them are achieving this. So much that companies will spend almost 5,000 million euros in the coming weeks, to which will be added around 6,000 million when the nearly 1,000 distributed by Telefónica on September 17th.

Patricia García, Founding Partner of MacroYield, explains: “With inflation at high levels and the expectation that it will remain at very high levels for an extended period, many investors are taking refuge in dividends as they have traditionally offered protection. Companies know that the dividend becomes attractive during these periods and will do whatever it takes to maintain it and even increase it. As long as they can, they will. We estimate that even during this period of economic uncertainty, they may try to maintain their dividend policy.”

next payments

More than twenty listed companies will pay dividends in the coming weeks. Very important Capricorn securities have an appointment with their shareholders. Apart from the Telefónica coupon for June, the biggest payout from Iberdrola will come in the coming weeks. The chaired power company will pay a gross coupon of €0.27 per share, which would mean a payout of up to €1,700 million in its next stock dividend, due to holders from July 7. This new optional dividend goes into effect August 2 for those who request payment in cash.

Another electricity company, Endesa, will make one of the largest payouts, which will total nearly €1,000 million. Interested parties can buy shares until June 28 and collect the gross dividend of EUR 0.937 per share on July 1.

Repsol is also among the companies making one of the largest global shipments. On July 7, the mineral oil company paid out a gross dividend of EUR 0.33 per share, which means a total expenditure of just over EUR 500 million. To get this coupon you need to buy Repsol shares on the final day, July 4th.

For their part, two other energy companies, Red Eléctrica and Enagás, will deliver 393 and 267 million euros respectively on June 28 and July 4. The first brings EUR 0.7273 gross per share, while the coupon for the second is EUR 1.02.

Acciona will pay a record dividend for the company. It is a coupon of 4.1 euros gross for each share that will be paid on July 7th and to redeem it the shareholder must own shares of the company on July 5th.

This dividend, which is associated with a payout of more than EUR 250 million, improves on 2020 to EUR 3.9 gross per share. The 2019 financial year ended with a distribution of EUR 1.92; 2018 allowed gross compensation of 3.5 euros and the group delivered 3 euros per share, which was offset until 2017.

Other Payments

Among the payments to be made in the coming weeks, that of Fluidra also stands out. The manufacturer pays EUR 0.43 per share on July 5th. This is the first payment of the dividend totaling 0.85 euros gross approved by the Fluidra meeting on May 5, the payment of which has been decided twice: a first payment of 0.43 euros on July 5 and a second payment of 0.42 euros, on November 3rd. At this point in time, Fluidra doubled the dividend of EUR 0.2 per share paid in the previous year.

MacroYield’s Patricia García explains, “For June and July dividends, we see companies generally returning to pre-pandemic levels or even above, when the opposite is true. Companies most affected during this period by the coronavirus and also affected by the rise in oil prices, such as Aena or IAG”.

Banking is approaching previous levels, although in some cases it has not yet reached them. “In the medium and long term, however, both companies and banks could have greater problems maintaining their dividend levels if, as we believe, earnings per share estimates are lowered,” adds Patricia García.

Below pre-pandemic levels

Nicolás Lopez, Director of Analysis at Singular Bank, explains that according to his forecasts, the dividends paid by Ibex 35 companies in 2022 could increase by 20% compared to 2021, amounting to around 24,000 million euros against 20,000 million euros . That number would still be 20% lower than the 30,000 million paid in 2019.

“The difference from pre-pandemic levels is explained by the lower dividend payments by banks, as well as the restrictions still in place in some sectors.” The expert adds that as these companies return to normal in 2023 or 2024, the profits will increase , could return to pre-pandemic highs. However, the looming recession may put a damper on any estimate.

Boom in share buybacks

In recent years, share buybacks as a form of shareholder compensation have exploded, reaching all-time highs. In 2021, the S&P 500 companies committed more than $850,000 million to this operation. In recent months, Spanish listed companies have jumped on the bandwagon of share buybacks as another way to pamper shareholders.

In 2021, Telefónica provided 500 million euros for share buybacks, increasing the proportion of treasury shares to 2.41%. The banking sector has also witnessed some of these operations. BBVA has one of the largest share buyback programs in Europe of up to EUR 3,500 million, conducted in multiple tranches through an outside agent, Goldman Sachs International. The first tranche of 1,500 million euros was closed in early March, while a second tranche of 2,000 million euros began on March 16, to be executed in two segments with a maximum amount of 1,000 million each.

For its part, Santander has already completed the implementation of its buyback program, having reached the maximum authorized amount of 865 million euros. The buyback of securities seems to have hit Spanish banks after years of stock dividends that have increased the number of shares.

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Source elpais.com

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