Considering the current economic headwinds, a perfectly diversified portfolio is what every investor needs. It is not only limited to picking stocks from different sectors but also extends to exploring different stock markets. Such diversification will reduce some risks specific to a particular country.
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Considering this, we have two energy companies from Spain, Endesa SA (ES:ELE) and Red Electrica Corporacion (ES:RED), operating in the utility segment. These companies are especially known for their stable dividend payments.
The Dividend Calculator tool from TipRanks comes in handy in such an analysis. With the help of this tool, investors can calculate the dividend payments over the years based on their investment amount and expected growth in yield.
Let’s discuss the stocks in detail.
Endesa SA
As the biggest electric company in Spain, Endesa serves around 10 million customers in Spain and Portugal.
Recently, the company reduced its earnings forecast for the next two years after the Spanish government approved the windfall tax on energy companies. This move is to safeguard customers from the impact of rising energy prices and soaring inflation.
The company is confident about achieving its earnings target of €2.2 to €2.3 billion in 2022. However, it reduced the numbers to €1.5 billion in 2023 and €1.8 billion in 2024.
In the first nine months of 2022, the company’s revenues of € 24.6 billion were 72% higher than in the same period in 2021. But the net profit was just 0.7% higher at €1.47 billion, impacted by costs like depreciation, taxes, impairment, and interest.
Nonetheless, the company’s dividend picture is still rosy, with a generous dividend yield of 6.5%. Even though the dividend payment is expected to reduce a little in the future, it still remains above its industry peers.
Endesa Stock Forecast
According to TipRanks’ analyst consensus, Endesa has a Moderate Buy rating. It has a total of seven recommendations, including five Buy and two Hold.
The average target price is €21.6, which represents a 20% change in the price from the current level.
Also, the beta of 0.64 makes it less volatile as compared to the overall market.
Red Electrica Corporacion
Another player in the utility sector is Red Electrica, which owns the national electricity grid in Spain. The company operates under the regulation of the National Energy Commission of Spain.
The stock is popular among investors as a consistent dividend payer over the last few years. The company’s dividend payments are backed by its profits and cash flow, which makes them stable. Red Electrica’s upcoming dividend of €0.22 per share is due this week.
The company’s stock has been trading down by almost 10% in the last six months. But the long-term returns are not that bad, with a 7.8% gain in the last three years.
Analysts’ View
According to TipRanks’ analyst consensus, Red Electrica has one Hold recommendation from Berenberg Bank.
The average target price is €15.7, which is 5.4% lower than the current price level.
Conclusion
The two energy stocks discussed above are good options for investors trying to venture into the Spanish market. Consistent dividend payments could also provide protection against market volatility.
