Endesa will reduce its dividend from 2021

Investors who position themselves on the stock market will have 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 2019 to 2021. In order to reinforce its growth policy and take advantage of the possibilities that the new energy transition cycle opens up. This represents a major change from the policy I was leading now.

In the words of one of its executives, it is about taking advantage of the growth scenario of the company that is owned by the Italian. At, and who participates at 100% in the operation that I carried out several years ago. In this regard, the Catalan company will no longer allocate the 100% of the profit to dividends that has been applied in the last three years. Otherwise, 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 earnings 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; second, digitization will provide many possibilities to lower costs, but will require a large amount of investment; and thirdly, improving our relationship with clients will also require new investments. «To clarify to investors what 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 5.9 billion 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 expected to be Endesa's estimated profits, some 2,000 million euros will be allocated to renewables, a sector in which it wishes to position itself as one of the reference electricity companies in the national sphere.

Although on the contrary, it is also very notable that a part of these estimated benefits will go to new investments in renewables and they materialize in the creation of the new electric mobility division that has been called Endesa X. Exactly this part of the agreement is encouraging this department to develop on the other hand and that even at a certain moment it can be listed on the Stock Market. independently, as has happened with other companies listed on equity markets.

Forecasts until 2021

Another very relevant aspect to note is that the forecasts of one of the leading companies of the Ibex 35 will be very close to 6,300 million euros in the period 2018-2021. Being one of the main reasons for this change that has been made in vary the remuneration system among shareholders. Whatever the case, it has been a great surprise for many of the financial agents who expect continuity in this type of remuneration in the equity markets. In this aspect, you can create a good dose of volatility in the price of your shares.

It is also important to note that these data provided by Endesa represent a 7% average annual growth, which in the end represents one 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 energy as a source of the benefits that it can achieve in the coming 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 entities. In this regard, from Bankinter they estimate that “The confirmation of the guidelines and the BNA 2020 dividend are good news for the action. The next cut in regulated returns in distribution and the opportunity for corporate operations will focus the attention of investors on the presentation of the Plan ”. Whatever the case, the position in the electricity benchmark company is very positive.

On the contrary, the JP Morgan fund manager casts a series of shadows on this measure, warning that “we understand, and expected, the message that, in the long term, the dividend payment should be below 100% of profit, but we think 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 that is that the stock valuation is moving in a range that goes from 17 to 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. In other words, it would no longer be in the way of achieving new heights in price. Beyond the appropriate cuts that may emerge 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 useful for people who have positioned themselves in this value of the selective index of Spanish equities.

The free rise figure was one of the most immediate objectives for Endesa and once the dividend from the valuation of its prices had been discounted. Because it would mean the confirmation of a trend clearly bullish and in all terms: short, medium and long. Beyond other technical considerations and perhaps also from a fundamental point of view. Whatever the case, Endesa is one of the values to pay attention to during this year that we have just started, despite the fact that the intensity of its movements is not one of the highest on the Spanish Stock Market.

Potential for improvement

In spite of everything, financial intermediaries give it a not specifically aggressive revaluation potential at this time, around 5%. Although it is true that they should review the latest news that has been caused 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 affecting companies listed on the selective index of the Spanish Stock Exchange, such as Iberdrola, Enagás, Red Eléctrica Española or the former Gas Natural.

On the other hand, it is important to highlight that Endesa represents one of the most stable values of Spanish equities. With very little volatility and most importantly for many of the most defensive investors in the market, with very little difference between their high and low prices in the same trading session. As a result of these very special characteristics, this title can become one of the best securities on the stock market to protect our money in times of greater instability in the financial markets. Through better performance than other listed companies.

Fixed income every year

In conclusion, it should not be forgotten that despite all these aspects, this company will continue to distribute dividends among all its shareholders. So that from this dynamics they can form a portfolio of fixed income within the variable, with a fixed and guaranteed income every year. Whatever happens in the stock markets.

Where it should also be noted that «The objectives for the period comprised in the years 2009 and 2020 they focus on reasonable conservative assumptions that should push Bloomberg's consensus estimates to 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, as the trend of dividends sends a negative message to investors. In the sense that it generates a very confusing message about what will happen with the collection of dividends for 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 result of these special characteristics, this title can become one of the best values on the stock market to protect our money.