You are correct about the share dilution. In the long term what the company is doing is not sustainable, however, with the huge real-estate write offs in the rear view mirror, and share earning expected to rebound sharply this year and next year....the outlook is improving. The growth in Latin America has helped the bank, also they played it very smart selling pieces of their banks to the public. I am very long term bullish on this bank and it is my largest position. I expect to be very well rewarded in the 3-5 year time frame. In a year or two the share price should be a lot higher, which will reduce the dilution, and the company maybe will have the option of a share buy back. Also look for a focus on U.S. Operations, and a rebranding and upgrading, and possible expanding....really with everything that has happened in the world in the last 5 or 6 years, this bank has done an excellent job. My target price is 15 in 3 years. Everybody should do their own research, and come to their own conclusion....but I'm bullish and still adding to my position.
The exposure to Latin America could be a drag going forward. Latin America has a lot of exposure to metal commodities which are not doing so well presently. Even with the expenditure for the World Cup and the Olympics, Brasil is having trouble growing, it could get ugly when they stop spending and it is time to pay the bill.
I remain long because I think it is undervalued, it could easily reach $15 in 3 years, but I'm very cautious.
I disagree, in the long term it is sustainable. During the 2008,09,10,11 the payout ratio on net earnings was about 100% (2012 paid out 300%). So in fact the dilution should have been neutral on the stock price.
If the share price goes higher, the dilution, currently around 3% a quarter, will reduce.
Even if the share price goes nowhere, remember your holding is going up by 11% a year (no tax)!!
I for one, hope they continue with the scrip dividend forever !
Very tax efficient for me, otherwise I LOSE 40% (my situation) on the dividend paid out ! (21% in Spain and the rest where I live, taxed as well)
I will then have to start trading my SAN.MC's around the ex-dividend date, to avoid receiving any dividend. Not ideal.