Telefonica (ES0178430E18) – A Trading Chance From Spain

Telefonica a Spanish telecommunication company, one of the largest in the world. It is also very active in Germany (with o2 brand). Telefonica's stock is a component of the Euro Stoxx 50 and currently looks promising both from technical and fundamental points of view. Telefonica always was a good dividend payer, however, there is a pitfall with the Spanish tax at source (Quellensteuer).
As you can readily see from the long term history chart, the stock is currently traded near its 20 years historical minimum.
Looking at its 3 months chart we might expect the stock will probably repulse from the support level of €7.5

As to the fundamental factors, they are as follows (source: onvista.de & morningstar.com, "e" stands for future expected values)

Year 2014 2015 2016 2017e 2018e 2019e
Profit per share (€)  0.61 0.51  0.42 0.69  0.75  0.82
P/E ratio 19.54 20.06 21.00 11.69 10.08 9.29
Profit Growth -39.60% -16.39% -17.64% +64.33% +7.93% +11.73%
Growth in Sales  -11.71%  -6.26%  +10.2%
Dividends (€)  0.40  0.40 0.55 0.40 0.39 0.40
Dividend yield  3.35%  3.90% 6.23% 4.92% 5.22% 5.34%




Likely, the main fundamental reason the stock price decline is the negative growth. However, Telefonica did achieve a turnaround in sales growth and is expected to do the same in profit growth. And it always was a solid dividend payer, as both table above and the chart of the adjusted price (blue line) readily show.

However, there is a pitfall: Spain deducts 30% tax at source on dividends! Even though EU residents are eligible to get a half of it refunded, in practice it is almost a no-go for a small retail investor. That's why keep watching our calendar, we have put a reminder to sell the stock before ex-Dividend date.
And of course you are welcome to discuss Telefonica stock in our forum.

Disclaimer: Vasily Nekrasov currently holds a long position in Telefonica stock.

Like this post and wanna learn more? Have a look at Knowledge rather than Hope: A Book for Retail Investors and Mathematical Finance Students

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