Down But Not Out: Banco Santander SA, Centrica PLC And ARM Holdings plc
Shares in Santander (LSE: BNC) have fallen 6% so far this year and are down by almost 40% over the past 12 months. Santander’s management has attributed much of this decline to concerns about the bank’s Brazilian business, which represents 19% of group profit.
However, outside of Brazil, the bank is outperforming most of its peers. After cutting the dividend payout by two-thirds last year, Santander announced that it was going to raise the dividend it pays in 2016 to €0.21 a share, from €0.20 in 2015 and pay €0.165 of it in cash. The rest of the payout will be made in script form. At a time when many of the bank’s peers are cutting their dividends, this this move to hike the payout helps Santander stand out as a bank that’s pushing ahead despite a tough operating environment.
Further, the group is also looking for bolt-on acquisitions to boost growth. Santander acquired failed Portuguese lender Banif for $163m at the end of last year, and it’s believed that Santander’s UK arm is interested in Royal Bank of Scotland’s challenger bank Williams & Glyn.
Santander currently trades at a forward P/E of 9 and supports a dividend yield of 5.3%.
Steady dividend growth
Centrica (LSE: CNA) reported an operating loss of £875m for 2015 after writing down the value of its assets by £1.8bn as a result of the fall in commodity prices, £1.5bn of which came from the struggling North Sea. As expected the company also cut its interim dividend by 30% but kept its final dividend almost unchanged at 8.4p. And after reducing its payout to a more sustainable level, Centrica now expects to be able to increase its dividend every year from now until 2020 having cut it from 13.5p in 2014 to 12p for 2015.
Now that management has committed to dividend increases for the next four-and-a-half years, Centrica looks to be an incredibly attractive income investment. The company shares currently support a dividend yield of 5.4%, and the payout is expected to rise in line with inflation until the end of the decade.
The shares currently trade at a forward P/E of 14.7 and earnings per share are expected to fall by 12% this year.
Shares in ARM (LSE: ARM) have come under pressure this year as investors become increasingly concerned about the state of the smartphone market. After years of explosive growth, smartphone sales are predicted to decline this year for the first time in a decade.
If the forecasted decline in smartphone sales does emerge then, ARM won’t escape unscathed. A large chunk of the company’s revenue comes from royalties related to the sale of processor chips built into smartphones. Still, ARM has been working flat out to diversify away from the smartphone market and management believes that the company is now well positioned to continue to grow even if smartphone sales decline as predicted.
ARM’s shares currently trade at a forward P/E of 29.3 and earnings per share are expected to leap by 43% this year.
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Shares in Santander (LSE: BNC) have fallen 6% so far this year and are down by almost 40% over the past 12 months. Santander?s management has attributed much of this decline to concerns about the bank?s Brazilian business, which represents 19% of group profit.
However, outside of Brazil, the bank is outperforming most of its peers. After cutting the dividend payout by two-thirds last year, Santander announced that it was going to raise the dividend it pays in 2016 to ?0.21 a share, from ?0.20 in 2015 and pay ?0.165 of it in cash. The rest of the payout will…