Monthly Dividend Stock In Focus: Grupo Aval Acciones y Valores

Revealed on July seventh, 2021 by Bob Ciura

Grupo Aval Acciones y Valores (AVAL) is a monetary providers firm that operates in Colombia and Central America. The inventory additionally provides a dividend yield of practically 5.0% at present second.

Grupo Aval additionally pays a month-to-month dividend, which permits shareholders to obtain earnings on a extra frequent foundation than the standard quarterly or semi-annual schedule.

There are simply over 50 month-to-month dividend shares in our protection universe. You possibly can see the whole record of month-to-month dividend shares, with vital monetary metrics like dividend yields, price-to-earnings ratios, and payout ratios, by clicking on the hyperlink under:

Shares of Grupo Aval have declined 17% from the start of the yr, however the inventory continues to be up 24% up to now 12 months.

This text will focus on Grupo Aval’s enterprise mannequin, its prospects for development, and whether or not the dividend is sustainable.

Enterprise Overview

Based in 1994, Grupo Aval provides all kinds of economic providers and merchandise to each private and non-private sector clients in Colombia and Central America. The financial institution has a market capitalization of simply over $6 billion. The Colombia-based financial institution supplies checking and financial savings accounts, time deposits, cashier checks and assortment providers.

Grupo Aval additionally supplies industrial loans, together with normal goal loans and leases, and client loans, together with payroll, private and auto loans. The financial institution additionally provides pension providers, doc storage and cost and assortment providers. Lastly, Grupo Aval supplies clients with funding fund recommendation and personal banking.

Grupo Aval has a heavy presence in Colombia.

Supply:Investor Presentation

Two-thirds of web earnings and 64% of belongings got here from Colombia within the first quarter of 2021. Which means that Grupo Aval’s enterprise will virtually at all times be immediately tied to the well being of its Colombia section. A downturn within the nation’s financial system would have a cloth impression on monetary outcomes.

Final yr was tough for the corporate, as the worldwide pandemic weighed on the corporate’s monetary outcomes. On March eleventh, 2021, Group Aval reported fourth quarter and Full 12 months (FY) 2020 outcomes. Grupo Aval earned $1.33 billion in total curiosity earnings for the quarter, representing a (6.5)% lower within the fourth quarter of 2019.

The Firm noticed a 63.4% improve in whole curiosity earnings, from $5.39 billion to $5.58 billion for the yr. Internet earnings was up 5.4% for the fourth quarter and 6% for the yr. After an enormous lower in gross price earnings to begin the yr due to COVID–19 restrictions, gross price earnings recovered considerably by rising 10% within the fourth quarter from the earlier quarter.

Whole belongings for the yr ended with an improve of 15.8%. The expansion in belongings was primarily pushed by a 12.4% yr–over–yr development in whole loans.The Firm made $0.57 per share in earnings for the yr, which is decrease by (20.8)% vs. FY2019. We estimate that Grupo Aval will earn $0.61 per share for the fiscal yr 2021. This shall be a rise of seven% in comparison with FY2020.

Development Prospects

With over US$90 billion in whole belongings, Grupo Aval is a number one monetary establishment within the areas it has a presence. The financial institution has the highest market place in practically each banking class in Colombia and Central America.

Grupo Aval has market management positions in numerous vital classes in Colombia, reminiscent of the highest spot in belongings, deposits, company, and client lending. Grupo Aval can be the chief in bank card issuance within the nation and no different monetary establishment within the nation has extra belongings underneath administration.

The financial institution’s dominance in its most important market can’t be overstated. For instance, Grupo Aval holds practically one out of each 4 automobile loans in Colombia. The financial institution additionally has greater than 1 / 4 of all of the belongings underneath administration for your complete nation.

This market management has helped Grupo Aval to develop at a really excessive fee in recent times.

The financial institution’s web mortgage portfolio has elevated with a compound annual development fee of 6.7% from 2016 via 2020 whereas belongings have elevated at a fee of 9.6% over the identical time period. Deposits have elevated by over 10% yearly over the previous 5 years.

This has allowed Grupo Aval to develop web earnings by 2.4% yearly since 2016. The expansion fee would have been a lot greater if not for a steep decline in 2020 because of the coronavirus pandemic.

Grupo Aval’s stability sheet is powerful.

Supply: Investor Presentation

The financial institution ended the latest quarter with practically $8.5 billion in whole belongings, together with $590 million in money and equivalents. Grupo Aval has $2.4 billion in long-term debt, with simply over $1 billion due in 2022.

Additionally serving to Grupo Aval’s enterprise is that the gross home product of Colombia has been strong through the years.

Previous to 2020, GDP development for Colombia had ranged from a low of two.2% to a excessive of three.6% over the previous eight quarters. The nation’s GDP fell by 6.8% in 2020 because of the coronavirus pandemic, however Colombia returned to optimistic GDP development of two% within the 2021 first quarter.

Dividend Evaluation

Based mostly on dividend funds via June, Grupo Aval is on tempo to distribute a complete of roughly $0.27 in dividends per share in 2021. Utilizing the present share worth of ~$5.65, the inventory provides a 4.8% dividend yield. This compares fairly favorably to the common yield of 1.3% that the S&P 500 presently provides.

Grupo Aval’s dividend has fluctuated through the years, however a lot of this is because of foreign money trade charges. We count on that dividends will proceed to fluctuate from yr to yr as a result of foreign money trade. Foreign money threat is at all times an vital consideration for traders on the subject of shopping for worldwide dividend shares.

That mentioned, we consider it’s doubtless that Grupo Aval will proceed to pay a dividend going ahead. We count on that Grupo Aval will earn US$0.61 per share in 2020. We count on a dividend payout ratio underneath 50% when utilizing anticipated dividends for the yr, which ought to make the dividend secure from a lower barring a serious discount in earnings.

Ultimate Ideas

Grupo Aval will not be a broadly adopted inventory within the US, however it a number one monetary providers firm within the a part of the world the place it operates. The financial institution has the highest management place in practically each class of banking in Colombia and Central America.

Grupo Aval seems properly managed and has a good stability sheet, though the corporate faces a big maturity subsequent yr. Its monetary place ought to permit the financial institution to proceed to construct outs its enterprise with a purpose to preserve its prime rating within the markets the place it operates.

The share worth has fallen considerably because the starting of the yr and the financial institution’s month-to-month dividends have fluctuated through the years, however the yield is sort of excessive at practically 5%. And the dividend seems secure utilizing earnings estimates for the yr.

Banking basically could be fraught with dangers, particularly banks outdoors the U.S., however Grupo Aval seems to be a strong funding for these with the next tolerance for threat and a need for month-to-month dividend earnings.