Printed 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 affords a dividend yield of almost 5.0% at the moment second.
Grupo Aval additionally pays a month-to-month dividend, which permits shareholders to obtain revenue 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’ll be able to see the whole listing of month-to-month dividend shares, with essential 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 remains 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.
Based in 1994, Grupo Aval affords all kinds of monetary providers and merchandise to each private and non-private sector prospects in Colombia and Central America. The financial institution has a market capitalization of simply over $6 billion. The Colombia-based financial institution offers checking and financial savings accounts, time deposits, cashier checks and assortment providers.
Grupo Aval additionally offers business loans, together with normal objective loans and leases, and client loans, together with payroll, private and auto loans. The financial institution additionally affords pension providers, doc storage and cost and assortment providers. Lastly, Grupo Aval offers prospects with funding fund recommendation and personal banking.
Grupo Aval has a heavy presence in Colombia.
Two-thirds of web revenue and 64% of property got here from Colombia within the first quarter of 2021. Which means Grupo Aval’s enterprise will virtually at all times be straight 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 troublesome 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 revenue for the quarter, representing a (6.5)% lower within the fourth quarter of 2019.
The Firm noticed a 63.4% improve in whole curiosity revenue, from $5.39 billion to $5.58 billion for the yr. Web revenue was up 5.4% for the fourth quarter and 6% for the yr. After a giant lower in gross price revenue to start out the yr due to COVID–19 restrictions, gross price revenue recovered considerably by rising 10% within the fourth quarter from the earlier quarter.
Whole property for the yr ended with an improve of 15.8%. The expansion in property 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 will probably be a rise of seven% in comparison with FY2020.
With over US$90 billion in whole property, Grupo Aval is a number one monetary establishment within the areas it has a presence. The financial institution has the highest market place in almost each banking class in Colombia and Central America.
Grupo Aval has market management positions in quite a few essential classes in Colombia, akin to the highest spot in property, deposits, company, and client lending. Grupo Aval can also be the chief in bank card issuance within the nation and no different monetary establishment within the nation has extra property underneath administration.
The financial institution’s dominance in its foremost market can’t be overstated. For instance, Grupo Aval holds almost one out of each 4 automobile loans in Colombia. The financial institution additionally has greater than 1 / 4 of all of the property underneath administration for your complete nation.
This market management has helped Grupo Aval to develop at a really excessive price lately.
The financial institution’s web mortgage portfolio has elevated with a compound annual development price of 6.7% from 2016 via 2020 whereas property have elevated at a price 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 revenue by 2.4% yearly since 2016. The expansion price would have been a lot larger if not for a steep decline in 2020 because of the coronavirus pandemic.
Grupo Aval’s steadiness sheet is powerful.
Supply: Investor Presentation
The financial institution ended the newest quarter with almost $8.5 billion in whole property, 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 stable over time.
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 constructive GDP development of two% within the 2021 first quarter.
Primarily based 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 affords a 4.8% dividend yield. This compares fairly favorably to the typical yield of 1.3% that the S&P 500 at present affords.
Grupo Aval’s dividend has fluctuated over time, however a lot of this is because of forex alternate charges. We count on that dividends will proceed to differ from yr to yr as a result of forex alternate. Foreign money threat is at all times an essential consideration for traders relating to 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 significant discount in earnings.
Grupo Aval isn’t a broadly adopted inventory within the US, but it surely 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 almost each class of banking in Colombia and Central America.
Grupo Aval seems nicely managed and has a good steadiness sheet, though the corporate faces a big maturity subsequent yr. Its monetary place ought to enable the financial institution to proceed to construct outs its enterprise so as to keep its high 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 over time, however the yield is sort of excessive at almost 5%. And the dividend appears secure utilizing earnings estimates for the yr.
Banking basically will be fraught with dangers, particularly banks exterior the U.S., however Grupo Aval seems to be a stable funding for these with the next tolerance for threat and a need for month-to-month dividend revenue.
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