Dividend yield at 6.5%: investors waiting for a clearer picture
The price of IGD’s stock underwent a sharp correction in the period between 20 February and mid-March in an environment characterized by the generalized collapse of the stock markets due to the measures taken to contain the global pandemic.
While IGD’s stock price reached very compressed valuations, subsequently it has yet to find a precise direction of recovery. Investors seem to be waiting, in fact, to have a clearer picture of the Italian government’s imminent fiscal policy measures to support retail businesses.
The Board of Directors formulated a new proposal for the distribution of a dividend of 22.8152 euro cents for 2019. If the proposal is approved by shareholders, at recent prices of around €3.50, the dividend yield would come to 6.5%.
Source: Italian Stock Exchange and EPRA data compiled by IGD
The steps taken by the authorities in different countries as of the end of February to contain the spread of Covid-19 brought different industrial and commercial activities to a standstill. The threat of a global recession coincided with a sharp collapse in the price of oil on 6 March as a result of the failed negotiations between Russia and the OPEC member countries. In this context the stock markets recorded a generalized and rapid drop in prices.
Despite the extensive expansionary monetary policy measures implemented subsequently by the central banks to limit the economic shock caused by the global pandemic, the response in terms of fiscal policies varied considerably from country to country. This, particularly in the Euro zone where deep internal divisions emerged, affected the impact of the ECB’s monetary policy as it cannot lend money directly to families and businesses.
Uncertainty about how the outbreak will spread in the future has kept price volatility high and caused stock markets to perform erratically since mid-March. Investors are, in fact, in the process of recomposing their expectations while waiting to have greater visibility as to the duration and
intensity of the recession caused by the lockdown in order to assess the impact not only on the global economy, but also on the earnings of individual listed companies.
IGD’s stock price reached a high of €6.39 on 6 February 2020, and then after 20 February fell sharply, hitting a low of €3.42 on 16 March. It then continued to trade in a range of between €3.50 and €3.88 in subsequent weeks.
The extent of the reduction in IGD’s stock price reflects the perception of investors that the Company is involved in one of the businesses impacted the most not only by the lockdown, but also by the social distancing measures that will be necessary in the less critical phase of the pandemic. IGD is also affected by the not insignificant element of country risk as the fiscal policy measures, while aiming to support retail businesses, have yet to be enacted.
