Buenos Aires — Investors usually purchase shares with the intention of seeing their price rise eventually. However, some companies offer a second type of profit mechanism for those who bet on them: the dividend payments. With only one week to go until the country’s pivotal primary elections, Bloomberg Línea consulted Argentine stock market experts for their top picks in terms of profit distribution, and their answers were mainly oriented towards companies in the materials and financial sectors.
“Currently, and due to regulatory provisions, almost all of the companies in the energy sector are unable to distribute dividends and this significantly reduces our list,” Ignacio Sniechowski, head of research at Grupo IEB, commented.
Having made the clarification, Sniechowski highlighted: “Among the sectors in which we see stocks with good dividends are banks and cement companies. In other words, companies like Telecom Argentina and its controller (Cablevisión). Also BYMA, Aluar, Comercial del Plata and Mirgor”.
For his part, Lucas Caldi, corporate credit team leader at Portfolio Personal Inversiones (PPI), stated that one of the sectors that presents the best returns on dividends is Argentina’s materials sector, with the four main companies in the sector (Ternium, Aluar, Loma Negra and Holcim) offering dividend yields (return on yield) ranging from 1% to 3.6%.
“Within this group, our preferred stock is Holcim, since it is the one that is down the most compared to the peak price it reached in 2018″, Caldi mentioned. And he added that, in addition, this company has the second best dividend yield (2.6%) and the highest free-cash flow yield of this group.
“Although Loma Negra has the highest dividend yield, it has achieved it at the cost of increasing its debt level, putting into question the sustainability of current distributions”. On the other hand, Caldi stressed that another industry that has been paying good dividends is the financial one.
In this regard, he summarized: “The ban on dividend payments from March, 2020 to December, 2021, a high capitalization and desires to reduce their balance sheets have inclined banks to distribute profits to their shareholders”.
Caldi clarified that his team is currently recommending having a only small position in Argentine banks, due to the “delicate monetary, exchange and financial situation” that the country faces. In that sense, he indicated that his preferred one in this sector would be Grupo Financiero Galicia.