Iberdrola shares approach all-time high of €21.84

Iberdrola nears record share price of €21.84

Is Iberdrola the king of the Ibex 35 or a dividend trap? This question has been debated for nearly 352 days, with the utility company currently trading near record highs. The stock surpassed €21, moving within striking distance of its all-time intraday high of €21.84 set on June 30. Goldman Sachs has set a price target of €25. Those who bought at €14 are celebrating, and those watching from the sidelines are equally optimistic.

The origin of this popular position is less about finance and more about habit. Parents buying shares monthly for their children over decades have turned many into holders of thousands of shares. "They got lucky; they could have chosen Telefónica," is the common takeaway. This luck is also seen in investors with 45% of their portfolio in the utility, 30% in BBVA, and the rest spread across various Ibex 35 stocks, seeing gains that often outperform those with more formal financial training.

Why is Iberdrola the Ibex 35's favorite defensive stock?

The dominant thesis is geographic diversification. Unlike Endesa, which is more exposed to the Spanish market, Iberdrola operates across several countries, making it less sensitive to local regulatory shifts. This is bolstered by its power grid business, which sees heavy investment and perceived secure returns, and a dividend that can be paid in cash or shares. Last week, reports suggested the company was close to becoming the world's largest utility by market capitalization.

However, there is no consensus. High debt levels represent a serious risk if the economic context shifts, while energy regulation, electricity prices, and sector taxes are the three main factors that could impact margins. The extraordinary tax on energy companies is the most frequently cited concern: an election advance or a change in government could lead to its expiration or modification, a possibility the market is already pricing in.

Dividends, oil, and gas: the fine print

The shareholder remuneration policy allows for payments in cash or shares, which some use to increase their position without extra capital. Oil prices enter the equation as a double-edged sword: they matter less in the short term but could change the long-term outlook. For drivers, high gasoline prices serve as a reminder that energy is never free.

Among the warnings, one is repeated often: the recommendation to index to the MSCI ACWI instead of concentrating a portfolio in a single stock. This advice comes from experience, trinc years of people accumulating thousands of shares in a single company through pure inertia.

What if the price stabilizes above €21?

The stock has spent weeks alternating between highs and slight corrections. It has seen red days, only to approach its record the next, maintaining a positive weekly trend. The recurring question is whether it will break the €21.84 ceiling this week. While some are buying more in anticipation of a correction, others are holding to collect dividends. This money-making machine has a clause that doesn't make headlines: it depends on regulation not eating into its margins.

Given these conditions, many feel they should be investing. Yet, people still ask whether to buy or sell. The most honest answer is the one no one wants to hear: if they knew, they wouldn't be asking.