Banking and energy boost dividends and push them into ‘new normal’

Covid has reduced the chances of nearly ten million investors in Spain receiving dividends to reward their investments in listed companies. In 2020, many companies have canceled or drastically reduced the fee paid to their shareholders. This situation has started to be corrected since 2022, especially due to the energy and banking sectors. The rise in interest rates, the end of the pandemic, and spiraling energy prices have allowed some companies to roll back their income statements and thus announce their dividend yield.. But everything is not the same, the increase in the price of money and the war completely changed the scenario. Dividends will have to live in a ‘new normal’ marked by inflation and uncertainty. “

“Almost all companies They canceled dividends in 2020 because income fell“, assures César Sánchez-Grande, head of Corporate Income Analysis4. Between April 2020 and July 2021, companies covered by ERTE were banned due to covid, a major slowdown in their fees, as well as banks’ paying dividends.

“The Spanish market has once again brought up what has always stood out against the European criteria, its dividends. Expected to return to returns not seen since 2014. With the fee up to September alone, the amount paid by listed companies for the whole of 2021 is already equal,” explains Martín Caride, M&A and corporate development partner at Nuclio consulting firm.

With the definitive end of the pandemic in 2022, dividends managed to come back strongly, especially in banks and energy companies. In the case of BBVA, the shareholder will be paid up to €0.35 per share compared to 0.10 in 2019, and also announced that it will increase its stake. pay (percentage of benefit for dividend payment) from 30% to 50% for the next year. In energy, Enagás stands out, which will pay 1.71 per share this year; It paid 1.60 in 2019.

“The energy and petrochemical industry will have a very good year in terms of dividends in 2022 due to high energy and oil prices. Due to the increase in interest rates, the financial sector will also have very positive results. European Central Bank,” says César Sánchez-Grande, head of Institutional Income Analysis4. “To see how dividends evolve in 2023, we will need to see how markets respond to raw material supplies and the direct and indirect effects of war in the coming months,” says Martín Caride of Nuclio consultancy.

Another example. Repsol, which posted a net profit of 3.222 million in the first nine months of the year last week, Will speed up dividend policy ‘roadmap’. Iberdrola also earned 29% more in the first three quarters of the year and announced a dividend of 0.45 euros per share, paid 0.40 per share in 2019.

“Both banking and energy are sectors with very recurring income. and therefore they tend to pay high dividends, which allows them to attract new investors. Other industries, such as tourism, have greater sales, revenue or customer complexity and dividends are difficult to forecast due to seasonality. Steel companies or construction companies will also offer dividends, although they will not be as stable as the banking or energy sector,” says Darío García, an analyst at investment firm XTB.

It will prefer to increase dividends by increasing profitability in banking, and it will do so by increasing it in energy companies. payAccording to the XTB analyst, it ranges from 40% to 60%. “The more utility energy resources have, the more likely they are to increase. pay”.

Bonds and Dividends

Bond yields have also increased significantly this year, so companies are trying to make stocks attractive to investors, which means paying them better. “If you don’t, investors will prefer bonds. Moreover, If inflation does not increase, dividends will also be consumed.Explains Álvaro Bañón, partner of Haltia Capital AV and professor of Financial Management at the University of Navarra.

“Taking into account that we will face a recession scenario in 2023, everything will depend on how the results will develop in the first months of the year. We don’t know if it’s soft or deep. The evolution of the macro scenario will determine the dividend future for next year and 2024”, says César Sánchez-Grande of Renta4.

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