Two years after the pandemic hit the stock markets, the Ibex 35 has returned to historical dividend yields of 4% , thanks in part to the financial sector and, above all, to the growth in profits after two years of impasse . Spanish banks have resumed pre-Covid remuneration, between 30% and 50% payout, and this is relevant taking into account two variables: that its profits are among the highest on the Ibex (in the case of Santander, BBVA and CaixaBank) and that it continues to be the most weighted sector, with 29%, within the selective.
The second heaviest in the market, with 20%, is the utilities sector, whose shareholder remuneration was not only not altered during the pandemic, but in most cases -except in Endesa- it will increase according to your strategic plans. Check here the calendar of upcoming dividends of the Spanish stock market
With the change of year, the Ibex 35 has recovered an average return of 4.1% for the coming months and this makes it the second largest European market with greater attractiveness. Only Italy surpasses it, which, in its struggle to be the market with the most succulent dividend, reaches 4.4% at current prices. The third (always) in contention is the British Footsie , with an average return on the payments of its companies of 3.8%.
It is followed by the EuroStoxx 50, with 3.1%, the German Dax Xetra, with 2.95%, and practically equaled by the Parisian Cac, with 2.9%. In his defense, it should be remembered that the Paris stock market was the most bullish on the Old Continent last year, with gains of 29%, which raises the divisor in this operation.
The Ibex has started 2022 with the desire to lead purchases in Europe. However, it must be remembered that in the balance of these almost two years of pandemic, it is the only large market on the continent that is still trading below the levels of February 2020 , specifically 14% below. The Milan stock market, on the other hand, is 4% higher and the EuroStoxx 50, 7%.
The dividend yield of the companies reached 7% on average
At its worst, the Spanish selective managed to pierce 3% profitability at the end of 2020 when many of the large companies had either canceled or paralyzed their remuneration due to the uncertainty posed by the pandemic.
At the time when the index plummeted to its lowest point, on March 16 two years ago, the dividend yield of the companies reached an average of 7% , although there were those -such as Repsol or Telefónica- who took their returns at levels above 15%-18%, something completely unreal. The Ibex had only broken these levels in another previous major crisis, that of 2012, reaching 9%, while sinking to 6,000 integers (in 2020, it fell to levels of 6,100 at its worst).
A reflection of profit
The national selective trades at a PER of 13 times, which is a multiplier in line with that presented by the large European stock markets, and with a discount of 10% compared to the great reference such as the EuroStoxx 50 (at 14.5 times). However , the Milanese Footsie is the cheapest listed selective, in terms of PER, below 11 times, followed by the British stock market.
These are the two markets, together with the French stock market, that show the greatest growth in earnings per share for the next two years. Specifically, 63% for the Italian market and 41% for the British market. French companies will make a 52% higher profit, in terms of EPS, in 2023, according to forecasts compiled by Bloomberg .
And where is Spain? The Ibex is the most backward of all of them. Analysts calculate that the 35 firms in the index will manage to increase their profit by 14% from 2021 to 2023. Now, in the last six months, EPS forecasts for the Ibex for this year have increased by 22%, where more they have done it only behind the Eb.
Looking ahead to this year, within the Ibex, ArcelorMittal will achieve the highest profit, with almost 12,600 million euros, although the cycle -which has reached its peak this year- will lead to lower profits, at 7,800 million in 2022.
It will be then when it gives up first place to Banco Santander , for whom the market expects it to achieve a net result of 8,200 million euros, slightly above the 8,124 million that the bank has presented at the end of 2021 a week ago. In the absence of all the companies that make it up, the forecast is that the Ibex will reach a historic profit in 2021, with more than 55,675 million euros.
The extraordinary of Telefónica stands out, above 9,500 million euros, as well as CaixaBank, with more than 5,200 million after the acquisition of Bankia, which materialized in the second quarter of 2021. It is followed by BBVA, with 4,563 million and Inditex, which will announce its results for the 2021-2022 financial year on March 16, and for which a net result of 3,684 million is expected.
This peak in the earnings of the index is the reflection of an improvement in remuneration -whose payout is linked to the increase in earnings- and also taking into account that the companies will distribute throughout 2022 by way of dividend the proportional part of its profits along with share repurchase programs announced by the big banks.
1.8% of the Ibex in repurchases
The ‘fashion’ of buybacks has arrived in Spain. Of the ten largest Ibex companies by profit, half have or have announced buyback programs for the coming months for an approximate amount of 8,250 million euros, which represents 1.8% of the Ibex’s capitalisation.
BBVA will repurchase up to 3,500 million euros of its capital; it is estimated that Santander will acquire another 1,318 million, and CaixaBank -in the absence of confirmation- will allocate some 1,800. ArcelorMittal has the sixth repurchase program in force for 876 million, and Repsol will receive a maximum of 756.7 million.