- Angela Gonzalez-Rodriguez |
New York - So far this year, the price of Inditex shares has picked up 18 percent. On a related note, the consensus profit forecast has fallen by 1.6 percent according to FactSheet.
In this sense, the Royal Bank of Canada (RBC) released a report at the beginning of the month in which it raises their target price of Inditex shares from 30 euros to 31 euros per share, which represents a potential 17 percent revaluation based on their current prices (in the region of 26 euros per share.)
The market expects that Inditex's shares will gain 17 percent this year
On May, 2 investors earned the dividend on account of the results of 2018 (0.44 euros per share) and on November, 4 they will earn another 0.44 euros per share. Inditex has raised its dividend this year from 0.75 euros to 0.88 euros, which implies an increase of 17.3 percent. It should be remembered that the largest fashion retailer in the world delivers 60 percent of its profits through the "payout" dividend and has a dividend yield of 2.85 percent.
Analysts’ consensus puts its target price at 28.9 euros per share, which shows an upward trend from its current price of 10.3 percent. Inditex continues to have the approval of analysts, who mostly recommend buying their shares: it has 19 buying recommendations, 5 advising to ‘hold’ and 6 ‘sell’ ratings.
A week ago, analysts at Morgan Stanley highlighted in a market note that Inditex extends the useful life of assets, increases the amount of information technology costs that are capitalised and rewrites provisions. "Individually, none of these measures can seem very significant, but we estimate that, together, they represent two thirds of the growth of Inditex's profits in the last 3 years," the report states.
In addition, the analysts of the American bank point out that Inditex obtains less than 20 percent of its profits outside Europe and has very low profit densities in three of the five largest clothing markets in the world.
Inditex will propose a dividend increase of 10 percent at the next Shareholders' Meeting
At the beginning of May, the company announced that in the next Shareholders' Meeting to be held next July, it will present a new policy of dividend distribution. It is an increase of 10 percent of the percentage of the dividend benefits ("payout"), from 50 percent by the present to 60 percent, to which an extraordinary progressive dividend will be added every three years.
The announcement of the change in the distribution policy was made a few weeks ago in a statement sent to the Spanish market regulator (CNMV) together with its results for 2018, in which it referred to an increase of 17 percent in its compensation policy, reports ‘Estrategias de Inversion’.
This change assumes a distribution of 0.88 euros per share, which will be broken down into a payment of 0.66 euros as an ordinary dividend and 0.22 euros as an extraordinary dividend.
Photo credit: Inditex