Trying something new: ENGI

As an index investor, dividend stocks are something I only look at from far. Once in a while, my eye does fall on a stock that draws my interest. This week, it happened again. And now I decided to act upon the discovery.

The French company ENGIE is a stock that I look for nostalgic reasons. This utility company is the first individual stock ever that I bought. I like this utility company due to its global diversified set of operations. As energy in the form of electricity and gas is not going away over the next few years, I am very optimistic about this company.

A small side note is on its place: I am not a an experienced stock analyst or DGI expert. In fact, I am more a contrarian…! So, do some research yourself if you want to know this company better.

 

IMG_7224_5_6
Cooling tower

The reasons for me to like the company are simple: the dividend policy a payout ratio of 65% – 75% of Net recurring income, with a minimum of €1 per share payable in cash for 2015 and 2016. At the current price of 13,94 this is 7,71pct gross or in the Belgian case 3,61 net yield (and 4,39pct if I file a lot of paperwork and be patient for a long time). This beats by far my savings account! For 2017 and 2018 the commitment is only 0,7€/share.

Other metrics are far less appealing: declining revenue, decreasing dividend , a loss in 2015. This does not look good. With metrics like this, most DGI investors would most likely already stop their analysis.

On the other hand, the number of estimates downgrades for the price went to 0. A lot of analysts are starting to become positive. The stock also looks to be bottoming out again, maybe ready for a rebound? There is a restructuring plan in place and thoughts of spinning off some parts of the company.

All of the above makes this stock an interesting candidate for my play money portfolio. Remember, this is not my core portfolio, it is the part of my portfolio where I take more risk, directional bets and make contrarian moves.

What move did I make?

Rather than buying the stock directly, I wrote an at-the-money put, with a a strike of 14. I got paid 35 cents for this. This means that my actual buy price will be 13,65. This is below the close price on Friday: 13,95. I will thus end up buying the stock at a lower price and have a higher yield: 3,69pct net.

Possible outcomes

ENGI trades above 14 on April 15: I get to keep the premium and make already 70 pct of the yearly dividend.

ENGI trades below 14 on April 15: I will get assigned and need to buy the stock at 13,65. I am very ok with this price.

ENGI

Other possibility

With options, there is also another way out: I can buy more time and roll the position to another date and maybe even another strike. This is an action I will consider early April or in the assignment week.

Only time will tell…

 

 

 

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24 thoughts on “Trying something new: ENGI

  1. Ciao ATL,
    Used to own them, sold the stock long ago… Major cause was the yield, which is now better thanks to the decline in share price. At that time there were better utilities out there (NG in uk, Terna in Italy, Red Electrica in Spain), with a similar yield. Now the yield is much more favourable to ENGI, so maybe it has a meaning to take them on.

    One question for your option trading: how many shares does 1 option get you? I have tried my current broker and normally they have 500 pieces x option, which is FAR too much for me to possibly buy, that’s why I am putting off the selling of put options…

    ciaocioa

    Stal

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      1. welll I have tried an option on an Italian stock (Atlantia), but stopped when I saw that the underlying was 500 pieces…I guess it varies from broker to broker right?

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          1. Wow you are totally right I didn’t think of checking the stock market site…:P There are some viable options there but the stocks are not interesting… I have to find another broker that has also other markets on its scope,..

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  2. @ambertree: nice work with the At-the-money put. if the shareprice remains above your strike price, you can sell another put and make some extra money 🙂

    best regards

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  3. Great to see that you are having so much fun with you play money. And if things keep going well, you can take your wife for a nice diner (or buy some more index funds….).

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  4. Yeah foreign dividend taxation is quite a mess in Belgium, not only are you usually double taxed but it’s often quite hard to get the tax treaty rate.

    For US dividends, you send one form to your broker and you get taxed at 15 percent. Most European countries on the other hand are a lot greedier and will let you go through a lot more trouble to get the reduced rate.

    I do believe Bolero has a simple process to get the 15% rate for French dividends but I haven’t tested it yet.

    Liked by 1 person

  5. Hey ATL, interesting buy and I hope it works out for you. Interesting you dipped your toe in the individual-share pool again :). Utilities are usually very safe things, so, it should be a good one for you.

    Tristan

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            1. Hey guys, I wanted to post asking for news but as I am away I could only do it now… Glad to see that everyone is fine! Hope that Belgium recovers quickly my thoughts are with you all and be strong!

              Stal

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  6. Nice! I think it’s good to have some “play money” for individual stocks once you get a good-sized chunk of money saved up. I’m also primarily an index investor, but I’ve got a few thousand dollars in individual stocks (mostly US DGI stocks). And like you say, it’s not part of your core holdings, you’re just trying something new. I don’t know much about this particular company, but I hope the investment pans out!

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