What Albert Einstein defined as the eighth wonder of the world is a classic that every investor should know: compound interest. “The most powerful force in the Universe”, according to the most renowned physicist in the modern world. Following this theory, the reinvestment of the capital gains generated by an investment makes it possible, demanding an annualized return slightly higher than 7%, to double the assets in a decade. And there are companies on the Spanish stock market that allow it to be done only by reinvesting the cash dividend in a maximum of 10 years without even requiring an increase in their profits and with a stable share price.
Specifically, there are twelve firms on the Continuum that have an average annualized return on shareholder remuneration equal to or greater than 7.3% expected for the next three-year period, from 2022 to 2024. These are dividend classics such as Metrovacesa and Aedas Homes , newcomers to the stock market and who have made shareholder remuneration one of their banners; Atresmedia (which has been orphaned in its sector after the takeover bid for Mediaset by its Italian parent company), Mapfre, BBVA, Lar España, ACS, Renta Corporación, Enagás, Logista, Prosegur and Línea Directa.
In a theoretical exercise taking an initial investment of 10,000 euros as a reference, if an investor reinvested a dividend that yields 7.3% annually, they would achieve a heritage of 20,230 euros in a decade thanks to the dividend paid over those ten years. Together with the profitability offered, it would yield profits of 10,230 euros. All this without contemplating revaluation in the shares of the companies and keeping the profit stable. It must be taken into account that in the event that profits increase, firms usually also increase the remuneration to their shareholders, with which the capital gains would be higher.
Real estate, a safe value
Metrovacesa, Aedas Homes and Lar España are among the most profitable dividends on the Continuous Market. In the case of the real estate developer headed by Jorge Pérez de Leza, the return on his expected average remuneration for the next three years is 15.6%. If this annualized return is taken and extrapolated to the coming years, the Metrovacesa shareholder will be able to fully recover his investment in six years via dividend.
This was one of the arguments put forward by many national investment fund managers for not going to the takeover bid launched by FCC for 24% of the promoter’s capital at a price of 7.2 euros, at half the NAV (net value of assets, in its acronym in English) that reflects the firm in its results), above 15 euros per share.
“Only for the payment of dividends, depending on the sale of homes, it will return the value of the company between three and five years. To all this you add the moment of the real estate cycle in which you are and the fact that, what that before was a legacy, the land, has now become a highly valuable asset” and it would not have made sense to go, affirmed José Ramón Iturriaga, manager of Abante Asesores. “We estimate that Metrovacesa can pay 680 million in dividends in the next four years (equivalent to 57% of the capitalization) so we are comfortable with the cash generation profile of the company alone”, they insisted, in the same idea, Sabadell analysts.
Whoever buys Mapfre shares today will be able to double their investment in eight years only with the return of their payments
Metrovacesa paid a payment of 0.6 euros last May, although the second remains to be determined. The market consensus expects that, charged to 2022, the firm will pay 0.93 euros per title, which yields returns of approximately 14%, which would subtract a second payment of 33 cents -predictably in December-; and that it beat the euro per share in 2023, already at 15.7%. It will reach 17.4% profitability in its payments in 2024, according to forecasts, the highest in the entire Spanish stock market.
That year Aedas Homes will achieve a return of 14.4%, since the market forecasts an annual payment of 3.09 euros. In view of the dividend for the 2021/2022 financial year, the housing developer will distribute a total of 2.16 euros, made up of a first payment in March of 82 cents and the second, complementary, scheduled for July of 1.34 euros. The firm has just announced this week the scheduled payment schedule that will take place on the 8th. In order to collect it, it is necessary to have Aedas shares before the 6th, a session in which the titles will already be listed without the right to receive it.
Taking into account the promoter’s average dividend yield for the three-year period, 12.3%, the shareholder could recover his investment (or double it) in Aedas within a period of 7 years just by reinvesting dividends.
The last firm linked to real estate or reits is Lar España. The socimi fell off the podium of the most attractive payments on the Spanish stock market as a result of the impact that the pandemic had on its shopping centers, with the total and partial closure of stores for months and which, logically, had an impact on its figures. Now, the company is trying to recover lost ground and it is the sixth most attractive remuneration of the entire Continuum for the three-year period, since it offers an average return of 9%, the same as Mapfre and BBVA.
Even so, the Socimi is far from recovering its pre-Covid payment, which amounted to 0.63 euros charged to 2019 (payable in April 2020). It only has an annual payment. Analysts estimate that by 2022 it will pay 0.40 euros gross per title and close to 50 cents charged to 2024.
It also sneaks into the Renta Corporación ranking, much smaller, but with a very solid remuneration: on average, more than 8% for the next three years.
retribution classics
Atresmedia made a comeback and has strongly returned to its leadership position with a cash dividend close to 12% for the coming years. This implies that, on an investment of 10,000 euros, its shareholders will be able to recover, thanks to the theory of compound interest, the initial assets in seven years.
The chain that owns Antena 3 or La Sexta distributes two annual subscriptions. The last one was on June 22, for 0.24 euros. To collect the next one -and first from the current year- we will have to wait until December. Regarding the dividend for the current year, the consensus expects it to remain stable, above 40 cents based on a profit that will be around 117 million euros, very similar to the one that closed in 2021.
Enagás is the only utility that appears among the most profitable payments, exceeding 8% on average for the three-year period. Buying shares in the gas company -at an optimal time, despite the sorrows, for the company due to the war in Ukraine and the harassment of Russia by the European Union- means aspiring to recover the money invested in nine years only thanks to the shareholder remuneration that must be reinvested periodically, yes.
The company has already confirmed a payment of 1.72 euros for 2022 (within its strategic plan until 2026) and 1.74 euros in 2023. The firm’s next payment will take place next Thursday, for an amount of 1.02 as a complementary payment for the 2021 accounts. The next payment -and the first of each year- is traditionally made in December.
Insurance companies and banks
Within the financial sector, two insurers, Mapfre and Línea Directa, and a bank, BBVA, are accompanied by the tailwind of the rise in interest rates by the European Central Bank (ECB).
The insurer chaired by Antonio Huertas has already distributed a dividend higher than the pre-Covid dividend for 2021, and the market expects it to beat 15 gross cents per share for the next three years, which yields returns of more than 9% after the action has fallen to the low zone of March this year, at 1.70 euros, when it reached more than 2 euros before the outbreak of the war. In the year, it yields 6%.
Mapfre, which maintains a distribution policy of between 50-60% of net profit, will have, according to consensus, a profit of 700 million this year -65 less than in 2021-, and will reach 800 in 2024 – just ten years after having managed to overcome this level-. Even excluding this hypothesis, it must be taken into account that anyone who shares Mapfre shares today will be able to double their investment in eight years only with the profitability offered by its dividend.
BBVA will increase its payment by 16% in 2022, up to 0.36 euros, which rents 9% at current prices
The other insurer that appears in the ranking is Línea Directa. The Bankinter spinoff promised a high payout, following its historical line of 90%, and it has fulfilled it. The market expects the firm headed by Patricia Ayuela de Rueda to generate average returns of 7.3% in the coming years. The company remunerates in four payments per year. Charged to 2022, it has already distributed the first on account, for a gross amount of 0.02 euros on June 8. The next payment is expected for the month of October, for the same amount.
BBVA has become a benchmark for shareholder remuneration after the end of the pandemic. Average returns of 9% are expected for the three-year period, which, by the way, does not include the repurchase of shares that the bank charged to the 2021 accounts. However, the market does not rule out a new repurchase program based on the excess capital expected from the entity before the situation in Turkey became complicated. The country has already entered a hyperinflationary scenario and Carlos Torres, president of BBVA, announced a week ago that he expects Garanti to stop contributing this year with a positive net profit to the group.
The entity, despite the context of rising rates that is presented, yields 17% on the stock market compared to the gains of its domestic peers -such as CaixaBank, Bankinter or Sabadell- and that has not yet registered a significant deterioration in the group benefit estimates. The market expects a profit of 4,900 million for this year, which will touch 5,100 in 2023 and up to 5,300 in 2024. Taking into account that its payout is 50%, this implies a dividend per share of 36 cents in 2022 (16 % higher than in 2021, by 33 cents) and will reach 0.43 euros in 2024.
ACS -which now pays its complementary fee in July- is also, historically, one of the benchmarks for remuneration in Spain. For the construction company chaired by Florentino Pérez, a return of 8.1% on average is contemplated, thanks to a gross dividend of 1.90 euros in 2022 and that will reach 2 euros in 2024. The next scrip (which is fully amortized to avoid dilution to the shareholder) of ACS is expected for July 18. The planned calendar started on Friday with the start of the trading period for the rights on the stock market. The 8th will be the last day in which you can request the remuneration in cash.
Facebook Comments
Disqus