Morgan Stanley has reaffirmed its Overweight rating on Repsol SA (REP:SM) (OTC: REPYY), setting a price target of EUR 17.50. The firm expects Repsol, the energy company, to unveil its first strategy update since 2020 alongside its fourth-quarter 2023 results scheduled for February 22, 2024. This update is anticipated to include multi-year guidance on shareholder distributions, particularly dividends.
The analyst from Morgan Stanley believes that Repsol’s guidance will be a crucial factor influencing the company’s share price performance. The firm’s projections are more optimistic than the consensus, anticipating higher dividends and dividend growth. However, given the uncertainties, Morgan Stanley has outlined various scenarios that could impact 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. In comparison, the dividend for the fiscal year 2022 was approximately €0.7 per share.
In the base case scenario, Morgan Stanley does not anticipate a change in the dividend policy but expects Repsol to distribute dividends at the higher end of the 25-30% CFFO range. Investors are keenly watching the strategy update on February 22, 2024, for insights into Repsol’s future shareholder distribution plans.