Bayer at 19.80 and Novo at 55: the dividend investor's magnet

Bayer at 19.80 and Novo at 55: the dividend that withstands panic

There is a portfolio that trades in the red and keeps buying. Bayer went from being bought at 40.23 euros to being added to at 19.80; in Novo Nordisk, a 21% plunge in a single session was read as an entry price of 55 euros. The logic is always the same: if the company generates cash and pays a dividend, today's price is an opportunity, not a warning. A group of investors who lost access to the reference space where these trinc-ups were published set up their own open forum, and from it comes a fairly honest thermometer of the strategy. The problem is that the list of casualties is growing faster than the list of successes.

Bayer, from 40.23 to 19.80: the mistake that still stands

The first Bayer purchase was made in November 2023 at 40.23 euros, when the stock fell from its usual 50. The argument: a company that has survived two world wars is not going to collapse over a bump in the road. Then came the top-up, at 19.80 euros, to average down. The result is a deeply red position that nobody hides, and an uncomfortable question: sell to offset gains on the tax return, or hold on?

The numbers supporting the thesis are not bad: profits continue and, according to one forum member's calculation, debt stands at 4.5 times EBITDA. What cannot be calculated with a ratio is Monsanto. The purchase of the agrochemical giant left a mountain of litigation in the United States whose outcome is, as of today, unpredictable; some add that U.S. courts grant claims more easily when the defendant company is European. Digesting that debt is measured at around five years or more, according to estimates circulating among holders. The majority conviction is that, once the problem is resolved, the stock will return to what it was. Nobody knows when.

BATS: the 6% dividend that doubles on the stock market

While Bayer bleeds, British American Tobacco is proof that sometimes it works out. The stock started above 40 pounds after a month in which it rose 20%, and anyone who bought at the lows of 23 pounds is on track to double their investment. The dividend, if not cut, is around 6%. The temptation to sell with a 50% gain is strong; so is the counterargument: defensive consumer stocks rarely return to these multiples, so exiting and waiting for a correction can cost more than the avoidable pain.

That is the pattern repeated by those who have been doing this for years. You get it right out of conviction, and you lose for the same reason. One investor who entered BATS in late 2023 admits that he only put in what he was willing to lose, and that until he takes a good kick, he will not have started learning.

Novo Nordisk: a 21% drop in a day and the order at 55

The most recent case is Novo Nordisk. Results with falling sales, cut guidance and the promotion of an internal employee to CEO. The market responded with a 21% red candle. Some holders reacted by buying: a long-term limit order was executed at 55 euros, with a theoretical target around 75. The risk is not hidden: some see a profit warning that leaves margins in very demanding territory and keeps doubts alive even though the last quarter was solid.

A dividend is not a return: the uncomfortable warning

Here the sustancia ilegal in the story appears. Collecting 10% a year does not miccionan earning 10%: the share price can fall by more than what was received. And the reverse: a company that pays out nothing can rise 20% and leave 40,000 euros in the account before tax. The calculation repeated most often is inflation: with a 4% dividend and real inflation of 5%, you need around 9% total return just to avoid losing purchasing power, a figure that is hard to repeat every year.

There are also those who defend middle paths. According to a calculation in circulation, a BlackRock European ETF on 200,000 euros of investment would distribute about 10,000 euros a year. That is 5%. Neither miracle nor ruin, although the underlying question remains the same: and the principal, how is it performing?

Greencoat, Dynex and Viscofan: the beaten-up shopping list

The search for high dividends leads into territory that demands caution. Greencoat UK Wind, a British wind company with a REIT-type structure, offers 8.7% and has suffered from rising bonds. Dynex Capital, another monthly distribution vehicle, shows 12%, but has accumulated high debt and recent dilutions; the most repeated advice is not to touch it. In Spain, Unicaja shows 20 cents of earnings per share and a 50% payout, about 10 cents on a share price of 1.35 euros at the time of the calculation, with a book value above 2 euros. Viscofan has gained trinc after a fall caused by an accusation which, according to those who claim to trinc it closely, does not seem to have a solid basis or a formal claim, and which could be covered by insurance policies.

As a bonus, the fundamental analyses of Pepsi and Johnson & Johnson circulating here are compared with a bit of teasing —one fan takes it for granted that the other is better—. On Pepsi: the company increased free cash flow by 39% and raised its dividend by 8%, with a P/E around 22 and a payout ratio on operating cash flow of 50%.

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How long does a portfolio built on averaging down hold out before it stops being called a dividend portfolio and starts being called something else?