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On Friday, Morgan Stanley (NYSE:) reiterated its Overweight rating on Repsol (BME:) SA (REP:SM) (OTC: OTC:), with a price target of EUR 17.50. (1EUR= $1.08) The firm anticipates that the energy company will present its first strategy update since 2020 alongside its fourth-quarter 2023 results on February 22, 2024. This update is expected to include multi-year guidance on shareholder distributions, particularly dividends.
The analyst from Morgan Stanley predicts that Repsol’s guidance will be a key driver for the company’s share price performance. The firm’s projections are more optimistic than the consensus, expecting higher dividends and dividend growth. However, due to uncertainties, Morgan Stanley has outlined various scenarios that could influence the stock’s reaction.
Repsol’s current distribution policy dictates that 25-30% of its Cash Flow From Operations (CFFO) is returned to shareholders. The company has already declared an interim dividend of €0.4 per share for the fiscal year 2023 and indicated that the final dividend will be at least equal to the interim. For reference, the dividend for the fiscal year 2022 was approximately €0.7 per share.
In the base case scenario, Morgan Stanley does not foresee a change in the dividend policy but expects that Repsol will distribute dividends at the higher end of the 25-30% CFFO range. The market is now looking towards the strategy update on February 22, 2024, to gauge the future direction of Repsol’s shareholder distribution plans.
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