IAG, Amadeus, Merlin and banks suspend dividends due to the coronavirus crisis, but most Ibex companies maintain them. After the summer they will be reviewed.
The crisis caused by the Covid-19 threatens the distribution of dividends on the world stock markets. For now, announcements about suspensions and deferrals of the decision on payments to shareholders have been limited to some sectors and companies at risk of falling into liquidity problems in the short term, as well as to certain companies that have chosen to adopt a position of extreme caution before the unprecedented slowdown in global economic activity.
In the market, it is assumed that the trickle of dividend cancellations will continue. Companies will reconsider their shareholder remuneration policies based on how events evolve and the real impact on their businesses.
“Now the key is to preserve the soundness of the balance sheet, which is the basis so that in the long term companies can distribute attractive and solid dividends. Protecting the cash in an especially difficult moment like the current one allows them greater flexibility to adapt to the context of uncertainty, “says Natalia Aguirre, director of analysis for Renta 4.
Investors are not misleading. “It is already discounted by the market that dividends and share buybacks are going to be canceled and the announcements are not going to penalize excessively the prices because there is no visibility in the companies’ business forecasts,” argues Jorge Lage, CM analyst. Capital Markets.
It can come to be seen as an “act of responsibility” by companies and be welcomed by the market, says Toni Cardenas, manager of Caja Ingenieros. In any case, although the dividend cut could be “a general trend this year to strengthen capital, it would be temporary,” says Ignacio Garcia, manager of A&G Banca Privada.
In Spain, announcements about changes in the shareholder remuneration policy are currently very few. “This issue is a little more sensitive because historically the dividend yield of the Spanish market has been higher than in the rest. It can cause decisions to be delayed or to choose to cut rather than suppress,” says Susana Felpeto, analyst from atl Capital.
There is a final investor profile with a high dividend yield that could diminish your interest in the Spanish Stock Market. “But the dividend for institutional investors is a little more neutral: they always like it, but for fundamental value it does not have much impact,” says Victor Peiro, director of analysis at GVC Gaesco Valores.
The bulk of the changes have occurred in banks. The ECB recommended the suspension of the distribution of dividends until October to increase the capacity of entities to absorb losses and maintain credit to individuals and companies, and most listed entities have already applied it to a greater or lesser degree.
Santander has decided to cancel the payment of the complementary dividend against the 2019 results and suspend the 2020 remuneration policy. CaixaBank It has halved the 2019 dividend and has promised to cut the 2020 dividend as well. Bankia has suspended the distribution of an extraordinary dividend expected for this year, although it maintains the 2019 complementary payment. Sabadell announced last Wednesday that it will not pay a dividend this year.
The two listed Spanish banks that are not on the Ibex, Liberbank and Unicaja, have chosen to postpone the payment of dividends. BBVA and Bankinter They could join at any time this movement that spreads throughout the European sector. “There is no institutional or professional investor who does not discount the suspension of the dividend in the financial sector, both banking and insurance,” says Garcia.
Mapfre He said last week that he maintains the dividend, even though the European regulator has advised insurers to reserve it for capital. If they change their minds, the market will assimilate it without problem because “it is already collected in price,” says Garcia.
Some of the companies linked to tourism, which have been suffering the collapse of their businesses for weeks due to the general restriction on the movement of people around the world, have moved. IAG has abolished the 2019 supplemental dividend payment, and Amadeus has canceled the proposal for a supplementary dividend of 320 million planned for the meeting that will be held, in principle, in June.
“Both companies are very healthy. But IAG has very high costs, due to its operating leverage, and the exceptional situation has overcome it. When normality recovers, it will pay an attractive dividend again. In the case of Amadeus, it seems like a positioning very prudent because the financial health of the company is enviable, “defends Cardenas.
Repsol it has chosen to keep its dividend flexible, but to suppress the buyback of shares of 5% of the capital intended to remunerate its shareholders. “It is a special case. If it were not for the fact that the price of oil has fallen so much, it should not have touched it: it has quite good liquidity,” says Peiro. “If crude remains below $ 40, it is difficult that it can continue to maintain the dividend distribution line,” says Garcia.
Inditex and Aena They have postponed their decision until the summer. “Inditex does not have liquidity or debt problems, but it is logical that they want to see how the progression of store openings is going. And in the case of Aena, after missing Easter, it waits for air space to open up. In both cases Normally, depending on the data, they reduce the dividend by a certain percentage, “said Cardenas.
AND Merlin Properties He has chosen to pay 0.15 euros of the expected dividend of 0.32 euros and put the remaining 0.17 euros on hold. Colonial could follow the same path. With dividend cuts, investor interest in socimis could decline.
The experts point out that the financial health of the Spanish listed companies is quite good, much better than the one they exhibited at the beginning of the 2008 financial crisis. Even so, some companies are being watched on the market.
“The values of sectors with a more cyclical bias, such as hotels, steel companies or producers of automobile components, are the ones that have the most ballots to cut the dividend. Above all, we would focus on smaller companies, with more room for maneuver. reduced and without recurring cash generation “, explains Andres Aragoneses, analyst at Singular Bank.
The dividend of the television networks, Mediaset and Atresmedia, traditionally very high, may be in danger because the income of these companies will be reduced by the foreseeable drop in advertising. “Investors would not be ‘sympathetic’ with a cut in the dividend in this sector,” says Garcia.
Analysts believe infrastructure groups will try until the last minute not to touch the dividend, but may have to give in based on their financial muscle. They see more risk in ACS, with little recurrence of income in some businesses and an important construction leg, which in Ferrovial, with better prospects in its cash generation until 2024.
In the case of Telefonica It is reasonable to think that you will end up reducing your dividend. “He already had to eliminate it at the time,” recalls Felpeto. “If you do it to reduce debt or to clean up the balance sheet, the market should interpret it positively,” according to Garcia.
The dividend that is not in danger is that of utilities (utilities). There might be some slight reduction in Enagas and Red Electrica, points out Cardenas. But, a priori, “they should be the last to make any adjustments or even leave it intact,” concludes Felpeto. Iberdrola has already spoken in that regard.
Changes in shareholder remuneration policies in Europe are more intense than in Spain. Half (26) of the Euro Stoxx 50 companies have modified their remuneration policies for the pandemic. Banking adjustments on the European stock markets, sponsored by the ECB and the Bank of England, stand out. Insurers are also under pressure from Eiopa to cut the dividend, but some have put up resistance: Allianz cancels its share buyback plan, but maintains the cash payment. There are also numerous cancellations in the tourism sector, given the restrictions on mobility due to quarantines, including Carnival, InterContinental Hotels and Lufthansa. The industrial hiatus has plummeted equipment sales and firms like Airbus, Volvo or Saab have changed their payments. Oil company dividends are also in focus. Everything added to that, as Eni or Total, they will be more inclined to reduce investments and repurchases of titles that to lower the payments.