Banco Bradesco Preference Shares (BBDC4:R$21.97) offers 3rd highest dividend yield in Bovespa Index, despite price rise 04 September 2020

NEWS BITES - BRIC

Dateline: Friday September 04, 2020

Banco Bradesco SA (SA:BBDC4), Brazil's largest Bank by market cap, is currently the 3rd highest dividend yielding preference stock in the Bovespa Index of 73 stocks.

The dividend yield of 7.8% is 1.14 times the triple-A bond yield of 6.8%.

The preference stock has increased 2.0 centavos (0.1%) from its previous trading session to close at R$21.97. Compared with the Bovespa Index which rose 435.7 points (0.4%) in the day, the relative price change was -0.3%. Today the preference stock traded at its 24-day high of R$22.44.

In the Brazilian market, the stock's relative price strength percentile is rising at 31 for 6 months, 33 for 3 months, and 53 for 30 days. A price rise combined with a rising relative strength is a bullish signal.

Banco Bradesco Preference Shares Stock Summary (traded in BRL)

Currency1 USD = 5.29 BRLDividend Yield7.8%
Sep 04 closeR$21.97SectorBank
Ave Daily Volume32,594,300 sharesShares Outstanding4,435,106,111
52-Week Range15.65 - 34.18Market CapR$97.4 billion [USD18.4 billion]
% Held by Top 3 Shareholders36.6EPS Growth (FY2019 vs FY2018)26.4%
P/E9.7

BBD ADR Summary (traded in USD)

Home ExchangeBrazilRatio1 ADR equals 1 ordinary share
CodeBBDTypeSponsored
ISINUS0594603039Sep 03 closeUSD4.12
CUSIP059460303Ave Daily Volume18,967,501 ADRs
*No. Held by Institutions726,609,24552-Week Range2.67 - 8.40
% of shares outstanding16.4%

INDEX

SECTION 1 Recent News

SECTION 2 Corporate Profile

SECTION 3 Top shareholders

SECTION 4 Today's Bullish Signals

SECTION 5 Ongoing Bullish Parameters

SECTION 6 Today's Bearish Signals

SECTION 7 Ongoing Bearish Parameters

SECTION 8 Bank Metrics

Glossary

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SECTION 1 Recent News

1.1 Dividends

August 10: Banco Bradesco Preference Shares announces dividend

Banco Bradesco Preference Shares today announced a cash dividend of 1.90 centavos per share. The ex-dividend date is Tuesday, August 04, 2020 and the record date is Monday, August 03, 2020 and it is payable on Tuesday, September 01.

July 06: Banco Bradesco Preference Shares announces dividend

Banco Bradesco Preference Shares today announced a cash dividend of 1.90 centavos per share. The ex-dividend date is Thursday, July 02, 2020 and the record date is Wednesday, July 01, 2020 and it is payable on Monday, August 03.

June 08: Banco Bradesco Preference Shares announces dividend

Banco Bradesco Preference Shares today announced a cash dividend of 1.90 centavos per share. The ex-dividend date is Tuesday, June 02, 2020 and the record date is Monday, June 01, 2020 and it is payable on Wednesday, July 01.

SECTION 2 Corporate Profile

2.1 Activities

Banco Bradesco S.A. attracts deposits and offers commercial banking services. The Bank offers business loans, personal credit, mortgages, lease financing, mutual funds, securities brokerage, and Internet banking services. Bradesco operates in Brazil and Argentina, the United States, the Cayman Islands, and the United Kingdom. Bradesco offers credit cards, insurance, and pension funds.

2.2 Contact Details

Websitehttp://www.bradesco.com.br/
Physical AddressCidade de Deus s/n Vila Yara Osasco, SP 06029-900 Brazil
Phone(11)3684 3749
Fax(11)3684 2714
Email4000.mvargas@bradesco.com.br

2.3 Industry & Sector

Classification LevelName of Sector
Industry GroupBanking Services
IndustryBanks
Economic SectorFinancials
Business SectorBanking & Investment Services

SECTION 3 Top shareholders

Top 3 shareholders

Name of the Share Holder% of Capital
Cidade de Deus Cia Cial Participacoes22.8
Fundacao Bradesco8.5
Ncf Participacoes S.A.5.3

% held by Top 3 Shareholders 36.6%

SECTION 4 Today's Bullish Signals

4.1 Momentum Up 4.3% Past Week

The price ranged between a low of 20.74 on Monday, Aug 31 and a high of 21.95 on Thursday, Sep 03.

DayBanco Bradesco Preference SharesClose price [BRL]Price change %Relative change %Comment
ThursdayOffers 6th lowest Price Earnings in Bovespa Index, despite price rise21.953.95.1Week-high of 21.95; Top Rise; VI*=3.3
WednesdayOffers 3rd highest dividend yield in Bovespa Index, after price drop21.12-0.2-0.02Price rise on beating relative strength
TuesdayOffers 9th lowest Price Earnings in Bovespa Index, despite price rise21.172.1-0.6VI*=1.1
MondayOffers 3rd highest dividend yield in Bovespa Index, after price drop20.74-3.4-2.0Week-low of 20.74; Steepest Fall; VI*=1.5
FridayOffers 9th lowest Price Earnings in Bovespa Index, despite price rise21.472.00.6VI*=1.1

[Volume Index (VI); 1 is average]

4.2 Rank in the top 7% by Relative Valuation in the Brazilian market

DescriptionValueRank
Dividend Yield %7.8%In Top 7%

4.3 Uptrend

Beta > 1 combined with price rise. The Beta of the preference stock is 1.2.

Past Quarter:

The Best 3 weeks in the past quarter

In the past quarter the week beginning Monday June 01 saw the highest weekly rise of 17.8% for a relative price increase of 8.6%. The rise was propped up by volume of 2.4 times average.

Mon-FriChange %Bovespa Index Change %RPC %Vol Ind [1 is avg]
Jun 01-0517.89.28.62.4
Jul 06-104.33.40.92.1
Aug 24-283.70.63.11

4.4 Undervaluation

Price/Earnings:

Banco Bradesco Preference Shares stock is trading at the sixteenth lowest P/E multiple in the Bovespa Index.

Earnings Yield of 10.3% > Brazilian ave of 9% > Bond Yield of 6.8%:

- Earnings yield of 10.3% is greater than the Brazilian average earning yield of 9%.

- The earnings yield of 10.3% is 1.5 times the 10-year bond yield of 6.8%.

(All figures in %)

Earnings Yield10.3
Brazilian avg9
Dividend Yield7.8
Bond Yield6.8

Dividend Yield:

Banco Bradesco Preference Shares stock is the third highest dividend yielding stock in the Bovespa Index.

Dividend Yield > Bond Yield of 6.8%:

The dividend yield of 7.77% is 1.14 times the triple-A bond yield of 6.8%. The times factor of 1.14 is above the benchmark factor of 0.67 times set by Benjamin Graham.

(All figures in %)

Dividend Yield7.77
Bond Yield6.8
Spread0.97

Dividend Yield of 7.8% > Index avg of 3.0%:

- The relative yield of the preference stock, defined by its yield of 7.8%, divided by average yield of dividend yielding preference stocks in the Bovespa Index of 3.0% is 260.7%. This suggests the preference stock is undervalued in dividend yield terms.

SECTION 5 Ongoing Bullish Parameters

5.1 Present Value of R$1000 Invested in the Past [3 Mo, 3 Yrs]; The Best Periods with PVR$1000 > 1,006

PVR$1,0003 mo ago3 yrs ago
BBDC4.SAR$1,007R$1,206
Bank sectorR$987R$938
Bovespa IndexR$1,082R$1,402

5.2 MCap: 5-Year Increase of R$39 billion [USD7 billion]

In the past 5 years Market Capitalization has increased by R$38.6 billion (66%) from R$58.9 billion to R$97.4 billion. Based on a dynamic start date of 5 years ago, there have been declines in MCap in 2 out of 5 years.

PriceMCap (BRL B)MCap (US$ B)
LastR$21.9797.418.4
1 Year agoR$27.91130.931.4
2 Years agoR$19.5394.523.4
3 Years agoR$20.81104.733.4
4 Years agoR$15.6682.425.3
5 Years agoR$10.5258.915.7

5.3 Annualised Period-based Total Shareholder Returns [TSR %]: The Best Periods with TSR > 6.3%

TSR %3 yrs5 yrs10 yrs
BBDC4.SA6.421.911.8

5.4 P/E/G < 1

The price earnings ratio of 9.7 divided by trailing twelve months eps growth of 26.4% corresponds to an attractive P/E/G of 0.4 times; being less than the value benchmark of 1.0.

EPS Growth (%)26.4
P/E/G0.37
P/E9.71

5.5 Increased Volume, up 201% in 5 years

In the past five years, Average Daily Volume of Trading (ADVT) has increased 200.6% to 32.6 million preference shares.

Avg. Daily Volume Traded 12 months ended Sep 04, million preference shares

YearADVT
202032.6
201915.0
201811.4
20179.0
201610.8

5.6 Increased VWAP, up 105% in 5 years

In the past five years Volume Weighted Average Price (VWAP) has increased by 105.1% to R$23.34. .

Past five years, 12 months ended Sep 04 (BRL)

YearHigh PriceVWAPLow Price
202034.1823.3415.65
201934.328.1618.87
201826.1921.5917.0
201721.0317.1314.41
201615.6911.388.01

5.7 Increased preference share turnover, up 264% in 5 years

In the past five years, average daily preference share turnover has increased 264.0% to R$754.2 million (US$142.6 million). This suggests increased liquidity.

Past five years, 12 months ended Sep 04 (BRL million)

YearAverage Daily Turnover
2020754.2
2019501.9
2018333.5
2017234.7
2016207.2

5.8 Satisfies one criteria of Benjamin Graham

- The P/E of 9.7 multiplied by the P/NTA of 0.8 is 7.9. Being less than the Benjamin Graham benchmark of 22.5 the preference stock appears undervalued.

SECTION 6 Today's Bearish Signals

6.1 Rank in the bottom 22% by Price Performance in the Brazilian market

DescriptionValueRank
PV1000 [1 yr] USD659In Bottom 22%

6.2 Downtrend

Price/Moving Average Price of 0.91 and negative MACD:

- The price to 200-day MAP ratio is 0.91, a bearish indicator. In the past 200 days this ratio has been under 0.91, 124 times suggesting further downside. The 50-day MAP of R$21.84 is lower than the 200-day MAP of R$24.21, another bearish indicator.

- The Moving Average Convergence Divergence (MACD) indicator of 12-day Exponential Moving Average (EMA) of 21.36 minus the 26-day EMA of 21.46 is negative, suggesting a bearish signal.

Trailing Relative Strength (6 months) at 31 percentile:

- The preference stock has a 6-month relative strength of 31 in the Brazilian market of 219 stocks and 88 preference stocks which means it has underperformed 69% of the market.

6.3 Overvaluation

Price/Earnings of 9.7 > sector avg of 4.3:

- Price/Earnings of 9.7 versus sector average of 4.3.

6.4 Other Bearish Signals

- Return on Equity of 15.6% versus sector average of 16.9%.

SECTION 7 Ongoing Bearish Parameters

7.1 Present Value of R$1000 Invested in the Past Year; The Worst Period with PVR$1000 < 834

PVR$1,0001 yr ago
BBDC4.SAR$833
Bank sectorR$789
Bovespa IndexR$999

7.2 Past year: price fall of 21.3%

1-Year price change of -21.3% for Banco Bradesco Preference Shares underperformed the change of 1.5% in the Bovespa Index for a relative price change of -22.7%.

Price Change %Year
Banco Bradesco Preference Shares-21.3
Bank sector-21.1
Bovespa Index1.5

7.3 Moving Annual Return of -15.2% in the past year:

Moving Annual Return was -15.2% in the past year. Based on a dynamic start date of 5 years ago, the real rate of return has averaged 24.9%

BBDC4Close (BRL)Dividends (BRL)Capital Gain / (Loss) %% YieldAnnual Return %
Sep 0421.971.71(21.3)6.1(15.2)
1 Yr ago27.910.9242.94.747.6
2 Yrs ago19.530.88(6.2)4.2(2.0)
3 Yrs ago20.810.8532.95.438.3
4 Yrs ago15.660.7348.9755.9

Close 5 years ago R$10.52

7.4 Annualised Period-based Total Shareholder Returns [TSR %]: The Worst Period with TSR < -16.6%

TSR %1 yr
BBDC4.SA-16.7

7.5 Satisfies 4 out of 9 criteria of Joseph Piotroski [pass mark 5]:

- Positive net income.

- Return on Assets improvement [from 1.3% to 1.5%].

- Improvement in current ratio from 32.1 to 33.6.

- Total shares on issue unchanged.

SECTION 8 Bank Metrics

8.1 Bank Metrics (FY2019)

DescriptionR$ B FY2019R$ B FY2018]Change
Interest Income25.3 23.8 Up 6.3%
Net Interest Income65.8 66.8 Down 1.5%

Favourable Changes:

- Interest Income up 6.3% from R$23.8b to R$25.3b

Unfavourable Changes:

- Net Interest Income down 1.5% from R$66.8b to R$65.8b

Glossary

ADVT: Average Daily Volume of shares Traded

Annual Return: Dividends Paid In a 12-Month Period/Price at the Beginning of the Period + Capital Gain or Loss over 1 Year/Price 1 Year Ago (%)

Current Ratio: Current Assets/Current Liabiliites (times)

Dividend Yield: Dividend Per Share/Share Price (%)

Earnings Yield: Earnings Per Share/Share Price (%)

Income during the n years (3/2/1): Dividends received during the Period

Moving Average Price (n periods): Sum of Prices for each Period/Number of Periods

PV1000: Present value of 1000 invested 1 year/'n' years ago

Price/Earnings: Share Price/Earnings Per Share (times)

Relative Price Change [RPC]: Relative price change is price change of stock with respect to Benchmark Index

Relative Strength (6 Months): Price close today/Price close 6 months ago, then ranked by percentile within the entire market.

Return on Assets: Net Profit/Total Assets (%)

Return on Equity (Shareholders' Funds): Net Profit/Net Assets (%)

TSR: Total Shareholder Returns is expressed as an annualized rate of return for shareholders after allowing for capital appreciation and dividend

Volume Weighted Average Price (VWAP): The Volume Weighted Average Price (VWAP) is the summation of turnover divided by total volume in the same period.

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