Undervalued, and ready to begin distributing dividends, this Spanish bank looks like a good bargain.
Banco Santander, S.A. (SAN)
From Contra the Heard
Established in 1857, Banco Santander is Spain’s largest bank. In Brazil, it chimes in at number three. As with many European banks, the stock price has been badly battered, currently sitting at around $3.00, miles away from when it traded north of $20. Revenue is near its historical peak at almost $80 billion for this enterprise that makes money year after year.
One aspect of the operation that is now different is that it is not paying dividends. The European regulator asked banks not to make distributions given the difficulties caused by—you guessed it—the pandemic. However, with the strong results in the past quarter, this financial institution would like to recommence paying them. Once that is approved, it should buoy the share price. In 2014, about $0.64 in payouts were achieved.
Picking a banking leader when it is down and out is a strategy that has worked exceedingly well at Contra the Heard in the past, like when we purchased Bank of America at $6.76. It felt yummy and vindicating when we were selling at $33.75. It would not surprise us to see the same kind of percentage gain with Santander.
Benj Gallander, Contra the Heard Investment Letter, 416-410-4431 gall@pathcom.com, contratheheard.com, December 9, 2020