HochTief ("HighDown") - First Dividend Title

✅✅✅✅✅

HochTief AG is Germany's largest construction company, but operates globally with its 50.000 employees!

We will first have a look at the chart

The development for 1, 3, 5 and 10 years are +15%, -49%, -31%, +28% respective - the 52-week high was €90.60 and the 52-week was at €60.75, I bought it today at €77.50 - which is roughly in the middle!✅

The 10-year chart:

It looks like there is a long upward trend, then a top in 2017, the low trading volume between 2017-2019! It has been trending downward since the peak in 2017

The 1-year chart

The low in November-20 was lower than the low in March-20, which is unusual and it is hoovering between €65 and €85!

The shareholder structure

Spanish ACS Group (one of the leading global construction companies) is the majority holder with 50%, Atlantia Spa, an Italian holding company active in infrastructure companies, next up with 18% and top funds such as Vanguard and Blackrock give me a quality stamp! ✅

Turn to the balance sheet and Assets first

On the Asset side, HochTief has almost €5.5billion in cash ("Kassenbestand"), wow, a third of the assets is cash - look as well how much cash the company has accumulated since 2016 => more than €2billion. Accounts Receivables ("Forderungen aus Lieferung etc") are down €2billion compared to 5 years ago! Goodwill is really manageable and it looks like that they have another €2.5billion in financial investments ("Finanzanlagen") - a very nice asset side ✅, but we continue and we are turning the page -> equity and liabilities: 

The Debt-to-Equity ratio is 94%!!!! crazy, but with the cash balance the company could pay it off any day. The D/E ratio has always been high, e.g. ~78% 5 years ago, but the average D/E ratio for engineering/construction companies is 28%! If you have that much cash and can borrow money very cheap and can generate excess returns, this could be a strategy.

The equity is only a third of that 5 years ago, mainly due Retained Earnings ("Gewinnrücklagen") of negative (€200m) last year and big investments in 2018!

Income Statement

The revenue has grown every year since 2016, but with a setback in 2020 - fully acceptable. Here I see the expected loss in 2019 as well. There is one entry Other company Income ("Sonstige betriebliche Erträge") of €1.6billion, which was never this big before, which made it possible to have a positive result for 2020! ✅

Next, the reason, why I did the transaction, is the dividend.

Dividend yield of just over 5% (expected €3.93) this year; last year €5.80! If we just play with the scenario that we get a rebound in 2022, with all government supported investments in infrastructure projects (especially in the USA) and the company pays 2022 again a dividend of €5.80, that would give me already a yield of 7.5%! ✅

I like the safety of the balance sheet and the strong cash position, few big owners of the company and cash-generating machine with a good position in a future trend of Bidens $2 Trillion plan to re-build the infrastructure with 20.000 miles of roads and 10.000 bridges