Enagás and Gas Natural at the bottom of the Spanish Stock Market

The gas sector is not having the best moment in Spanish equities. With very high depreciations in an apparently quiet business segment. To the point that their values acted as safe havens in the most unfavorable scenarios for the stock exchanges. Well, since the beginning of January this is no longer the case. If not, on the contrary, the volatility in the training of their prices is being one of their most relevant common denominators. To the surprise of small and medium investors.

Two of the securities with the greatest specific weight in the sector, such as Enagás and Gas Natural, have positioned themselves as two of the worst companies on the Ibex 35. Significant decreases have been observed in the 9% and 5%, respectively. The reason for checking this unprecedented scenario in the financial markets is found in a decision that the Spanish Government will take in the coming weeks. You are going to prepare a new revenue cut regulated by electricity companies and those most affected will be gas companies.

One of the main effects of this measure is that financial intermediaries carry out successive downward revisions to their estimates in the near future. In this way, your target prices will drop substantially from now on. TO bad newsundoubtedly for investors who position themselves in these two important values of the selective index of national equities. With the opportunity to even reduce the profitability of their respective dividends.

Enagás: dividend cut

If you are an investor in these companies, you should know that the dividend yield could fall as of 2019. Not surprisingly, they are currently some of the most generous companies with this shareholder remuneration. With a fixed and annual interest around 6%. One of the highest of the Ibex 35 and that can make them less attractive to make new purchases from now on. Because they have doubts that it will be reviewed in accordance with the new measures that the executive has applied.

This is a very hard blow for these companies and can establish that sales will prevail over purchases in the next trading sessions. It is a factor that you have to have as a novelty this year. And that can make you quit these companies linked to energy and gas to be part of your investment portfolio in the next years. This was definitely not the news that investors expected to take positions in either of these two Spanish equities.

Objective of this measure

This plan designed by the government aims to alleviate the energy bill paid by Spanish users. But with a very negative impact on gas companies since the cuts would be quantified at no less than 700 million euros. Gas Natural and Enagás are the main victims of this significant budget cut. To the point that Banco Sabadell estimates that for Enagás it would mean a drop of 80 million in its gross operating result. While for Gas Natural the impact would be 90 million euros.

As a result of this scenario, it cannot be ruled out that both stocks will adjust their prices in the coming months with the new reality. In practice, this means that they could experience a significant correction in their price. Even though it remains to be seen what the intensity of these depreciations will be. Whatever the case, there are more financial analysts who think that it is time to abandon their positions in these companies of the Ibex 35. Because they can have access to a downtrend with a certain trajectory, at least in the short term.

Bad start to the year

The effects of this measure have not taken long to be noticed in the prices of Gas Natural and Enagás. With very important decreases throughout the first month of the year. Because in effect, in both cases they are the worst values of the Spanish selective so far this year. Regarding the latter, the fall is in the 10% while Gas Natural has left almost 8% of its price. In what is constituted as one of the worst operations made in the equity markets. Not surprisingly, analysts are warning that their shares may fall further in the markets.

This behavior of these securities in the energy sector contrasts substantially with the start of the Spanish Stock Market. After a disappointing December where the traditional Christmas rally was lost. But, of course, what few investors thought is that these two stocks had a terrible start to the year. Where, if you were positioned, there is no doubt that you would have lost a lot of money. Even though perhaps the worst is yet to come for the first two quarters of the year. Whatever the case, a tremendous real disappointment for all small and medium investors.

Target price of your shares

Before the measures promoted by the executive were made public, the prospects for the two companies were not bad at all. If not the opposite, as advised by the consensus of Reuters analysts dispose of Enagás shares, assigning a target price of 25.8 euros per share. With the same recommendation as for Gas Natural, to which they recommended maintaining their positions. With a potential increase of 20.69 euros per share. Or what is the same, that you could make your financial contributions profitable up to a 13%.

In spite of everything, we will have to be very attentive to the reviews that are formalized in the coming days. Because I sure know the forecasts will go down. To the point that you can definitely tilt sales over purchases. Whatever the case, it is not the best time to open positions in Gas Natural and Enagás. But on the contrary, if you have open positions, it is time to think about whether it is convenient to market your shares from now on. Faced with a more unfavorable scenario that these values of the Spanish Stock Exchange can develop.

Considered as a refuge value

One of the surprises of these actions is motivated by the fact that both Gas Natural and Enagás were considered safe haven values par excellence. With a very stable situation since it was very rare violent fluctuations in the conformation of their prices. Something that has collapsed due to the application of these energy measures. Not in vain, at the moment it is the antithesis of what refuge values are. In a very radical way as you can see these days. It resembles in its behavior more to the values of speculative profile.

On the other hand, it should not be forgotten that the interest on your dividends can be cut. Up to levels around 4% or 5%, which means reducing your profitability by almost three percentage points. Another bad news for small and medium investors who will see their profitability reduced every year. Regardless, there is an opportunity that these effects will be reduced only in the short term. A factor that will have to be attentive in the coming months to develop some type of investment strategy.

Other alternatives in the stock market

Within the energy sector there are another series of values that will not be affected by this important adjustment plan. How are the cases of Endesa, Iberdrola or Red Eléctrica who will benefit from these measures. To the point that many investors will look back at these values. On the other hand, they also have a significant dividend yield. With annual payments of between 4% and 6% and which are formalized through two payments on account each year.

Well, these stock proposals are considered stable stocks. Nails in recurring business lines. A factor that provides added value to these companies that are listed in the selective index of Spanish equities. Whatever the case, they are two good options to reorient the positions that have been taken in these days in Gas Natural and Enagás. Due to the certain similarity between all these businesses since it cannot be forgotten that they are integrated into the same stock market sector. With a series of common denominators that identify all these companies.

Whatever the case, one thing was clear at the beginning of the year: Gas Natural and Enagás have been protagonists of the financial markets. In a way, unexpectedly, since it has taken many small and medium investors by surprise. Something to which we were not used to this class of so special values due to its own characteristics in the training of its prices.

Now it only remains to check how far these movements can go in two of the most relevant values of Spanish equities. You won't have to wait long to understand what its real effects will be on the markets. Because in effect, it is feasible that they lose more value in the market in their current conditions.