Investors who are positioned in the stock market will be taken with an unpleasant feeling with the news that the electricity company Endesa will reduce its dividends as of 2021. This is something that is contemplated in the Straté Plangico for the period from 2019 to 2021. With the aim of reinforcing its growth policy and taking advantage of the opportunities opened up by the new energy transition cycle. This represents an important change with respect to the policy that he was leading up to now.
In the words of one of its directors, it is about taking advantage of the growth scenario by the company that is owned by the Italian Enel, and that it participates 100% in the operation that I carried out several years ago. In this sense, the Catalan company will no longer allocate 100% of the profit to dividends that has been applied in the last three years. If not, on the contrary, it will be reduced to 80% of them, although with a small nuance that small and medium investors should value from now on. As is the fact that profits will increase in this period.
On the other hand, from this new perspective, the CEO of Endesa explained that “firstly, we have to face a new cycle of energy transition; secondly, digitization will bring many opportunities to reduce costs but will require a large amount of investment; and thirdly, improving our relationship with customers will also require new investments ”. In order to explain to investors which will be the new cycle of the electric company listed on the Ibex 35.
Endesa: profit sharing
There are still two years until change this remuneration system to the shareholder. Because in effect, all its profit will be distributed in the next two years and on the other hand it is estimated that the same will be done with a total of 5.900 million euros in the next four years. One of the reasons for this important change in the dividend that shareholders will receive is the fact that of the 6.400 million that they expect to be Endesa's estimated earnings, around 2.000 million euros will be allocated to renewables, a sector in the one that wishes to position itself as one of the reference electricity companies in the national sphere.
While on the contrary, it is also very remarkable the fact that a part of these estimated benefits will go to new investments in renewables and they are materialized in the creation of the new electric mobility division which has been called Endesa X. Precisely this part of the agreement is encouraging this department to develop on the other hand and that it may even at a certain moment be listed on Stock market independently, as has happened with other companies that are listed on the equity markets.
Forecasts until 2021
Another very relevant aspect to highlight is that the forecasts of one of the leading companies in the Ibex 35 will be very close to 6.300 million euros in the 2018-2021 period. Being one of the main reasons for this change that has been made to vary the remuneration system among shareholders. In any case, it has been a great surprise for a large part of the financial agents who expect continuity in this kind of remuneration in the equity markets. In this sense, you can create a good dose of volatility in the price of your shares.
It should also be noted that these data provided by Endesa represent a 7% average annual growth, which in the end represents a percentage point more than that estimated in the previous strategic plan of the basic energy company. On the other hand, we cannot forget that this listed Spanish equity market is at a very crucial point in its traditional line of business. In the sense that it is going to focus more on renewable energies as a source of the benefits that it can obtain from the next few years.
Backed by financial agents
The decision of the electricity company to reduce the value of the dividend to 80% of the profits generated has obtained the approval of some of the most important financial institutions. In this sense, since Bankinter estimate that the “The confirmation of the 2020 BNA guidelines and dividend are good news for the action. The next cut in regulated returns in distribution and the possibility of corporate operations will focus the attention of investors on the presentation of the Plan ”. In any case, being very positive about the position in the electricity reference company.
On the contrary, the fund manager JP Morgan casts a series of shadows on this measure, warning that “we understand, and we expected, the message that, in the long term, the payment of the dividend should be below 100% of the profit, but we believe that the message could have been structured from a more pragmatic point of view that avoided the perception that the dividend per share will be reduced by approximately 10% in 2021 and that there is no visibility from there.
At levels of 20 euros per share
Either way, one thing is clear and it is that the valuation of the shares is moving in a range that goes from 17 and up to 21 euros. If this last level is exceeded, it would be immersed in one of the most favorable figures for small and medium investors, which would be none other than the so-called free rise. That is, it would no longer have obstacles to reach new heights in the price. Beyond the appropriate cuts that may arise from this clear break to the upside. Where it would probably have a very high upside potential that could lead to prices that would be very interesting for people who have positioned themselves in this value of the selective index of Spanish equities.
The figure of free rise was one of the most immediate objectives for Endesa and once the dividend has been discounted from the valuation of its prices. Because it would mean the confirmation of a clearly bullish trend and in all terms: short, medium and long. Beyond other technical considerations and maybe also from a fundamental point of view. In any case, Endesa is one of the values to take into account during this year that we have just started, despite the fact that the intensity of its movements is not one of the highest in the Spanish stock market.
Upside potential
However, financial intermediaries currently give it a not particularly aggressive revaluation potential, around 5%. Although it is true that they will have to review the latest news that has been generated from this company. In particular, the change in orientation regarding the payment of dividends. All this in an environment of the electricity sector that has improved significantly in recent months and that affects companies listed in the selective index of the Spanish stock market, such as Iberdrola, Enagás, Red Eléctrica Española or the former Gas Natural.
On the other hand, it should be noted that Endesa represents one of the most stable values of Spanish equities. With very little volatility and what is more important for many of the most defensive investors in the market, with very few differences between their maximum and minimum prices in the same trading session. As a consequence of these very special characteristics, this security can become one of the best values on the stock market to protect our money at times of greatest instability in the financial markets. Through better performance than the other listed companies.
Fixed income every year
Finally, it should not be forgotten that despite all these aspects this company will continue to distribute dividends among all its shareholders. So that in this way, they can form a portfolio of fixed income within the variable, with a fixed and guaranteed income every year. Whatever happens in the equity markets.
Where it is also noteworthy that "The objectives for the period comprised in the years 2009 and 2020 they are based on reasonable conservative assumptions that should push the Bloomberg consensus estimates up by low single or mid-digit digits, ”as JP Morgan financial analysts point out.
Not surprisingly, they also emphasize a negative fact on the part of the company, such as that the dividend trend sends a negative message to investors. In the sense that it creates a very confusing message about what will happen with the collection of dividends from the period contemplated by this electric company. With possible corrections in its prices as a result of these doubts that it has created among investors. As a consequence of these very special characteristics, this security can become one of the best values on the stock market to protect our money.