This bank has restored its dividend, and now is paying $0.03 annually. It’s a start! And it is a very positive bet on the future.
Banco Santander, S.A. (SAN)
From Contra the Heard
Banco Santander is Spain’s largest bank. In addition, it is the third largest in Brazil, along with operations in Argentina, Chile, Mexico, Poland, Portugal, the UK, and the United States. It has a long, rich history, having been started in 1856 and was profitable year after year until the last annum, when it took the largest loan loss provision of any bank in Europe—to the tune of 1.6 billion Euros. Meanwhile, the corporation rebounded to a profit in the first quarter of this year with black ink of $1.94 billion. Chairman Ana Botin forecasts that even better results are in store.
Last year, in-line with the European Central Bank’s recommendation, SAN eliminated the dividend. But with the wonderful earnings and the relaxation of the ECB regulations given the economic recovery, a payout has been reestablished. One would think that it will continue to grow as the corporate goal is to restore a payout of 40-50% of the underlying profit. As it increases, there is an excellent chance that the share price will also jump, perhaps to our Initial Sell Target of $8.24. That is well below the $20+ where it traded a number of years ago.
In many ways, this bank reminds us of Bank of America, which we bought at $6.76. Both of them are major players in their markets, and from our perspective in the “too big to fail” category. We finished unloading the BAC position at $38.79 for a 474% gain. It has continued to go up since.
At the Contra the Heard Investment Letter, we are happy to hold this stock and look forward to additional capital appreciation. Toss in a dividend and the returns could be luscious. It has already vaulted about 40% this year and has done about a double since it joined the portfolio at $2.05 last year.
Benj Gallander, Contra the Heard Investment Letter, 416-410-4431, gall@pathcom.com, contratheheard.com, June 11, 2021