Recent Purchase: Enagas SA – A high-yield European Utility

I got my Christmas present! I just added 100 shares of Enagas SA to my dividend growth portfolio. It was a bit of a surprise to me, because I didn’t include the stock on my watchlist.

This is where I really appreciate the community, because one of you brought the company to my attention again. I didn’t look into it for more than a year and I was surprised to see that it had such a steep decline in share price. This resulted in a very high dividend yield right which is now at almost 9% (8.93%).

So I did my due diligence 2 weeks ago and as fortune had it: the stock dropped another 10% after 2 downgrades from Barclays and JP Morgan. You gotta love the pumping and dumping of analysts, because they so often give us additional opportunities to buy attractively valued shares! πŸ˜‰

Why did they downgrade the stock? Well simply said: the Spanish regulators are making it harder for Enagas SA to grow. There is increased price pressure by stricter requirements and more focus on a sustainable way of operations and energy.

This is no problem for me, because I consider myself a combination of a Dividend Growth Investor and a Value Investor. Off course, an almost 10% yield is a typical red flag for any investor and it requires extra caution to invest, but it doesn’t mean that we should automatically ignore it. It just means extra caution to understand what’s going on.

This is what I’ve done over the last two weeks. I’ve studied the last few years of annual reports and investor presentations to figure out their strategy and their commitment to the dividend. I’ve also done a fair value estimate using 3 different scenario’s. All of this to get a really good feeling for the company and to know for sure that I would feel comfortable with owning shares in this company.

As mentioned before, it led me to initiate a position and purchase 100 shares of Enagas SA. I’m very happy with this purchase and it should allow me to mix up a bit my portfolio.

But I’m not done yet with my story. I’m also experimenting a bit with YouTube again, so if you’re interested in my observations and analysis of this company then have a look at my video below.

It includes the following segments:

  • Business Background – how does it earn their money?
  • Stock Analysis – what’s their dividend history and how do their metrics look like (i.e. ROIC > WACC, Chowder Rule, P / FFO)
  • Fair Value Estimate – using discounted cash flow analysis based on 3 scenario’s (using template from Sven Carlin)

Having said that, let me know what you think about it πŸ‘


PS: may I also ask you to subscribe to the channel in case you are going to watch the video? πŸ™ I’m trying to start publishing more regularly and my goal is to grow to 1000 subscribers in 2021.



What do you think about this recent purchase? Do you own it as well or are you considering to initiate a position? Or do you think that it’s a value trap?

Let me know what you think in the comment section below πŸ‘‡

Enjoy the remainder of the holiday break 🌲✨

Yours Truly,

European Dividend Growth Investor


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Disclaimer

I’m not a certified financial planner/advisor nor a certified financial analyst nor an economist nor a CPA nor an accountant nor a lawyer. I’m not a finance professional through formal education. I’m a person who believes and takes pride in a sense of freedom, satisfaction, fulfillment and empowerment that I get from being financially competent and being conscious managing my personal money. The contents on this blog are for informational and entertainment purposes only and does not constitute financial, accounting, or legal advice. I can’t promise that the information shared on my blog is appropriate for you or anyone else. By reading this blog, you agree to hold me harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information provided on this blog.

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European DGI

It's my desire to retire early via Dividend Growth Investing as a passive income stream. This is not easy and especially when living in Europe. That's why I started this blog and share my journey: to give you a European perspective.
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Carmel Fenech
Carmel Fenech
9 months ago

Enagas shares are not that volatile so suitable for conservative investors or those already at a pensionable age. Bought 145 sharers last March at 19.8 and bought again this month at 18.4 to average my unit share price. U don’t expect any spectacular growth but I be content with a steady dividend. Thanks for your article and look forward to your next one. All the best. Carmel.

European DGI
Admin
Reply to  Carmel Fenech
9 months ago

Thanks for stopping by Carmel πŸ™‚

High-πŸ™Œ on the purchases I think you also enjoyed the fat dividend they paid few days ago. I’ll be eagerly waiting for July πŸ‘Œ

Thorsten
9 months ago

“Boring on a high level” A good choice !

European DGI
Admin
Reply to  Thorsten
9 months ago

Nothing wrong with boring! I would even say: the more boring the better. Predictability is important πŸ’ͺ

It is me
It is me
8 months ago

Just found this blog. I was really lacking DGI blogs with an european point of view.

I bought Enagas years ago. At that time they had a compromise to raise dividends by 5% each year, but now they have plans to freeze dividend for years. As a DGI I won’t add any.

BTW, the only spanish company I “might” find “suitable” as a DGI is REE.