Ace in quantity and high dividend yield

Written by Demosthenes Triga

The truth is that research into A.A. A company at “great opportunity” levels is no easy task. The vast majority of large-cap companies in the FTSE have, at least in theory, a fair valuation. This does not mean, of course, that they cannot become more expensive or cheaper simply by changing the numerator of the fraction (P/E), because we assume that market estimates of estimated earnings are rational.

OPAP is a company whose dividend yield is its strength. The company announces the financial results for the fourth quarter/12 months of 2023 on Wednesday, March 13, after the market closes, and the annual general assembly has been held. on April 25 (approval of the dividend), while the dividend will be cut, according to the financial calendar, on April 29, 2024.

Market estimates for the dividend are €1.53 per share, with a dividend yield of 10% if the price at the end of 2023 (31/12/2023) is taken into account. It is noteworthy that the company paid an ex-dividend of €1 on November 2, 2023 (deadline). It is worth noting that the average dividend yield for the last five years (2018-2022) exceeds the ten percent rate and amounts to 10.6%.

In terms of valuation, OPAP trades at 7.6 times 2024 EBITDA on an EV/EBITDA basis, with the 10-year average above 9 times. Meanwhile, the price-to-earnings (P/E) ratio based on estimated 2024 earnings is 13 times!

OPAP's 2023 returns lag GDT's total return (including dividends) by 14%, with GDT returning 44% with the banking industry being the major contributor. However, when looking at investing over a 10-year period, the average OPAP return outperforms the GDT total return by 10%, because it produces more consistent returns!

The stock seems to reward investors who stay invested in the stock longer than those who look to find a good entry point into the stock! In a broader context, investing in stocks has shown that in 5 years it outperforms bond returns by 75%, while in 30 years the percentage rises to 100%, and at the same time with less risk! I promise we'll deal with this finding in a future article.

Thus, the year seems to have started well, with OPAP at +8% and GDPSA at around +9%. OPAP's 2024 earnings growth, according to market estimates, is +7.4%, which is already outpaced by the stock's performance in the first two months. In short, unless OPAP pulls an ace up its sleeve, it looks like the price to earnings per share (P/E) ratio will rise, with the numerator “working” more than the denominator already since the first two months of the year.

The bottom line is that OPAP, with annual earnings growth rates of about 7% to 10%, can justify a P/E ratio of just over 10 times net earnings. Maybe even 13 times! This will cause the stock price to grow by 10% per year while keeping the P/E ratio constant (since the denominator is also growing by 10%). If the dividend yield is added to this, we understand that an annual OPAP yield of around 20% is quite realistic!

Finally, virtual reality and augmented reality are designed to revolutionize the gambling experience. Imagine walking into a virtual casino, with all the sounds and sights of Las Vegas, but from the comfort of your home or store. Would you say that the above is a “beat” for OPAP for the coming years, giving the necessary impetus for further development of its profitability?

Optima Bank: Dividend yield could reach 7% in 2024

Optima Bank was listed on the AA on October 4, 2023 at a starting price of €7.2 per share, while the IPO was approximately 5.1 times oversubscribed. The stock's performance since its listing until the day following the announcement of its financial results reached +9%.

The bank announced financial results for the fourth quarter/12 months of 2023 on 6 March, with net profit exceeding €100 million and reaching €107 million. Optima Bank's tangible equity stood at €499 million at the end of 2023 or €6.8 per share, with its price-to-book ratio above unity set at 1.16x.

It is worth noting that the bank will proceed with a dividend of 0.44 euros per share (representing 32% of annual profitability for 2023), with an attractive dividend yield of 5.6%.

The bank's management published its estimates for the current year on the occasion of the announcement of the financial results for the 12 months of 2023. In particular, its net profitability in 2024 is expected to approach 124 million euros, while the return on equity will exceed 20%. (29% in 2023), in line with management estimates.

Finally, if we assume that management will keep the dividend payout ratio constant (32%) in 2024 as well, then based on the estimated profitability, the dividend would increase to €0.54 per share, pushing the dividend yield to 6.9%! Based on estimated earnings and earnings assumptions, the estimated 2024 P/B ratio is limited to unity!

Retail vs Pharmaceutical Note 1

The consumer won medicines by state, if only by carambola. More specifically, Amazon.com Inc. (NASD: AMZN) replaced Walgreens Boots Alliance Inc. (NASD:WBA) in the Dow Jones Index (30 largest US companies). Amazon is a retail company, while Walgreens Boots Alliance's core business is pharmaceuticals.

This change reflects the evolving nature of the US economy, where consumer power remains strong. The reason for the change in the index was the decision of Walmart Inc. (NYSE:WMT) to proceed with a 3:1 split. This had the effect of lowering the weight of the Walmart index due to the price-weighted construction of the index. Walmart remains in the Dow Jones Index. The above change was implemented in the Dow Jones before the opening on February 26.

Please note that Dow Jones holdings are weighted based on stock price, not market capitalization. As a result, United Health Group, Microsoft, Goldman Sachs, Home Depot, and Caterpillar are the companies most heavily weighted in the index. The Dow Jones index includes only 30 companies, yet it has greater industry diversity than the S&P 500, Nasdaq, or Russell 1000 Growth, but less than the Russell 1000.

Agenda (12-17/3/2024)

Focus on the financial results of NGE, OPAP and Moody's ratings

Today, Tuesday, the National Bank (before the start of the meeting), Aegean Airlines (after the close), and Trade Estates are expected to announce the financial results for the fourth quarter/12 months of 2023.

On Wednesday, OPAP (after market close) and Titan (before market open) are expected to announce financial results for Q4/12-month 2023, while ELSTAT will announce the granting of vehicle registrations for February.

Friday is the closing day for SMEs, Rights in Equities, SMEs and Rights in FTSE/ATHEX Large Cap, while ELSTAT announces the vacancies that existed at the end of Q4 2023. On the same day, late at night , Moody's (current rating “Ba1 Low” and stable outlook) announced our country's rating, with the institution not yet giving an investment grade. Finally, the next rating is expected to be issued on April 19 by Standard & Poor's, while the next review by Moody's is scheduled for September 13, 2024.

All eyes are on inflation on Tuesday

Abroad, German February inflation will be announced this morning, OPEC will release its monthly oil report, and at 2.30pm US February inflation will be announced. Volkswagen announces its financial results.

On Wednesday, the January GDP change will be announced in Great Britain, while Adidas and E.ON publish financial results.

On Thursday, the producer price index and retail sales for February will be published in the US, while RWE is next to announce financial results.

On Friday, the week concludes with the University of Michigan publishing short- and long-term consumption and inflation forecasts based on March data.

* Demosthenes Tringas is a certified stock and market analyst at Beta Exchange – [email protected]

** Copied from Kivalio newspaper