Saturday, February 24

The values ​​of the IBEX 35 to hedge inflation

Inflation is the great enemy this year for the IBEX 35, but the threat it poses to portfolios can be mitigated with sensible alternatives that offset the increase in prices.

January inflation in the euro zone reached 5.1 percent and although the ECB has just recognized that it is in a dangerous zone, the projections of the magazine INVESTMENT put price growth this year at 3 percent.

This forecast coincides with the range of between 2 and 3 percent that it foresees in Europe Pictet AM, as explained by the managing director for Iberia and Latam, Gonzalo Rengifo, on the podcast.

The first thing investors need to be clear about is that hedging against 7 percent inflation is virtually impossible. The problem must be addressed by managing sensible projections. And a 3 percent rate is.

To protect yourself from inflation, “you have to look for an investment that generates more than that 3 percent, since the effect of rising prices is that it reduces the purchasing power of investments,” he said. Rengifo.

The Dividend Alternative Against Inflation

Before, investors protected themselves with government bonds, which gave 5 percent, but now they are negative. For this reason, experts believe that investors should play a more active role in the selection of their portfolios.

“There are companies that are giving dividend yields above inflation, and it is the most comfortable alternative for the Spanish investor,” he assured. Rengifo.

It is about betting on liquid, large companies, with solid business models and that recurrently offer capital flows above inflation.

With these premises, selected the IBEX 35 listed companies with the best projection of discounted dividend yield in the next twelve months, and which also have the greatest potential for revaluation.

ACS shines for dividend and growth potential

The best alternative within the IBEX 35 is ACS. The construction company chaired by Florentino Pérez discounts a dividend yield in the next twelve months of 7.44 percent, more than four points above expected inflation.

Although this percentage is below the 8.8 percent of Enagas, the advantage of ACS is that it has a potential increase of 39.5 percent, while gas is in price and barely offers returns of 3 percent.

The construction company began the year by closing the sale of its industrial services division to Vinci for 4,902 million euros, an operation that left net capital gains in the group’s coffers of 2,900 million euros.

The advantage of ACS it is that it is a company purely exposed to the cycle, which will now be able to benefit from the market turning towards growth stocks and more exposed to the reopening of the economies and the return to normality.

Telefónica, in full comeback

Another alternative in the telecommunications sector is Telefónica, whose expected dividend yield in 2022 is 7 percent.

It more than covers inflation and distributes about 2,000 million euros a year in dividends, when its cash generation is much higher. In addition, the dividend is one of the main weapons to defend its large shareholder base.

The problem is that for fundamentals it only discounts increases of 9 percent. The intense competition in Spain or the scant progress in divestments are some of the factors that most penalize value.

However, due to technical criteria, the stock is in full swing and its upward path towards 5 euros remains intact. The market moment is the best in recent months.

Among utilities, another alternative is Endesa, whose dividend yield is close to 6 percent, with the addition that it discounts a potential rise of 25 percent.

Repsol and the recovery of crude oil

Among the listed companies with the highest dividend yield, expected always appears Repsol, which discounts a percentage of 5.61 percent.

The catalyst in this case is rising oil prices, a factor that has led rivals like Shell to increase the dividend. However, the rebound potential of the oil company is somewhat limited after the last increases and round of 12 percent.

For investors who prefer upside potential, a good alternative is Acerinox, since it discounts increases of 47 percent.

The point is that the estimated dividend yield is somewhat lower, at 4.63 percent, although it is still 1.6 points above inflation.

Finally, consider the trump card of the two big banks. Both discount similar dividend yields, of 5.61 percent in BBVA and 5.43 percent in Santander Bank. In addition, its upside potential is around 17 percent.

The point is that the sector has remained very toned since Thursday, after learning that the ECB will tighten its monetary policy, which could translate this year into an increase in interest rates.