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.
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.
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…
amber tree leaves 
I stick to the index stocks, like yourself. No need to worry about when to sell, capital gains, commissions, etc.
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Index stock is indeed my major play as well. My playfund still had some cash available, yet not enough for an etf.
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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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The yield is indeed OK now. Let’s see how it evolves.
This option trades on Euronext and 1 contract equals 100 stock. At my broker, I can easily sell just one contract.
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hi Stal,
what are the products that you are trading? one contract in stock option always comes out to 100 shares.
best regards.
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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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According to me, it is driven by the exchange. It is they that decide on what a standard contract is. It seems that Atlantia is indeed 500.
Have a look here: http://www.borsaitaliana.it/borsa/derivati/specifichecontrattuali/lottiminimiopzionisuazioni.html?lang=en
It ranges from 100 to a whopping 5000.
Interesting fact to know. I assumed it was always 100.
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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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@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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that is the plan! My GTC order to buy it back is already in place. As mall rally up will do the trick
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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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The play money is indeed also fun money! That is a plus.
We are thinking about a kids free weekend…
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Nice, good thinking!
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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.
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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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Tristan, thx for the support. It is my way to try to get some more return than the basic interest here in Belgium. Capital appreciation is a secondary goal.
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off topic: everything it is ok? are you working in brussels?
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Thx for asking. We Are fine. I do work in Brussels but not in the centre.
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I work at Malbeek. I am ok, but a lot of people not.
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Woow, my thoughts are with you and your friends and family… I hope you find the power to recover from this insanity.
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thanks.
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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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Thx stalflare…
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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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