Petrobras, Vale and Engie were the three most indicated companies, with five recommendations each, to investors looking to build their October portfolios focused on dividends. Next is Banco do Brasil, with four recommendations, followed by CPFL Energia, Bradesco, B3 and Copel, with three nominations.
For this month, the CNN Brasil Business took into account the indications of nine banks and brokers: Banco do Brasil, Santander, Terra, Órama, Warren, BTG Pactual, XP, Ativa and Genial.
The main segments indicated for October were: financial, electrical and protein.
The dividend is a portion of a company’s earnings and is distributed to shareholders, and can be paid monthly, quarterly or semi-annually.
The amount depends on macroeconomic, sectoral and individual issues of each company, and how these aspects influence each corporate performance.
For this month, the consultancies recommend concentrated allocations to companies with higher capitalization (Large and Midcaps), with the exception of the thematic portfolios of lower capitalization.
Genial Investimento recommends stocks linked to commodities only in portfolios that allow for greater diversification. “Attractive prices and the possibility of an improvement in Chinese news influenced our decisions on the subject.”
In general, the assessment is that there is still room for continued improvement in the prices of assets linked to the domestic economy, however, the limitation of the scenario ahead does not allow for more aggressive choices
Here’s what experts commented on the top recommendations for October:
In September, Petrobras had an adverse market performance, below the Ibovespa index (-11% vs. -1%). We attribute the company’s performance primarily to (I) lower Brent oil prices (around US$85), which have reached their lowest level since January, which could impact the company’s operating results, (II) increased fears regarding the global economic recession.
Despite the risks of recession, we remain optimistic about oil prices, due to a structural supply problem, and about Petrobras’ cash generation and dividend distribution.
Comment: Land Investments
It is the largest private producer of electricity in Brazil, with its own installed capacity of 10,791MW in 72 plants, which represents about 6% of the country’s capacity. The company has almost 90% of its installed capacity in the country from renewable sources with low GHG emissions, such as hydroelectric, wind, solar and biomass plants.
With the acquisition of TAG, Engie is now also the owner of the most extensive natural gas transport network in the country, with 4,500 km, which cross 10 states and 191 municipalities. We have a positive outlook for the second half of 2022, given the progress of transmission projects and the new energy sales contracts signed by the company, which totaled an average of 142 MW between 2022 and 2027.
Comment: BTG Pactual
An important point is that Vale doesn’t really have an “electoral call”, so we really think that the next elections in Brazil don’t matter much for the thesis. With Vale accounting for almost 15% of the Ibovespa index and with the market aggressively short/under-index, we believe the thesis is looking more skewed here, and we expect recent uncertainties to dissipate going forward.
We believe we are in the most depressed moment and expect China’s economy to gradually improve in 2023 as the government relaxes Covid-19 restrictions and the housing market settles down. We see Vale’s management as remaining highly disciplined in its capital allocation strategy (very little growth capex) and we expect most of the agenda to depend on cash returns to shareholders. We reiterate our purchase, with shares trading at 4x EV/EBITDA 23.
Bank of Brazil
Banco do Brasil (BB) is the largest Brazilian bank by assets, with a market share of close to 20% in terms of loans — the largest in the country. BB’s 50% stake in Banco Votorantim reinforces its presence in the vehicle financing market. In addition, the institution has a regulatory mandate to lend to the agricultural sector in Brazil under various government-sponsored programs.
With a buy recommendation and target price of BRL 64.00 (2023E), Banco do Brasil is our Top Pick in the banking industry. In addition to having one of the highest dividend yields expected for 2023 (11.8%) among our coverage, BB should maintain the good momentum of earnings throughout 2022, moving towards delivering the top of the guidance, which now projects a net profit between R$27 and R$30 billion in the year (vs. R$23-26 billion in the last guidance).
Source: CNN Brasil