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TotalEnergies SE(TTE) – Retire safely with this European dividends

TotalEnergies SE operates as an integrated oil and gas company worldwide. The company operates through four segments: Integrated Gas, Renewables & Power; Exploration & Production; Refining & Chemicals; and Marketing & Services. It also operates approximately 16,000 service stations and 25,000 EV charge points. 

TotalEnergies SE was incorporated in 1924 and is headquartered in Courbevoie, France.
Market Cap: €129b

Quick side note: Oliver and I working together for the last few months. He decided to research dividend stocks from the European market also. I’m totally happy about it and hopefully, you are also because investing in another continent is helping your diversification and increases your chance to stay on the positive side when it comes to market crashes and overall to stay safe with your investments.

Let’s get right into TTE and we can take a look at the past performance and current situation…

Oil and Gas businesses’ revenue, net income, overall profit, and EBIDTA depend on the oil prices. You can quickly understand this if you drive a car and it does matter what you pay at the Gas station. In 2020 Net income, Free Cashflow and Revenue were very low because the price of oil was very low this year, almost TTE had to pay for the transportation company to get rid of the oil they were producing. 

2018/2019 and 2021 are almost identical and we are seeing good and healthy numbers.

Here on this Spreadsheet is very clear that they are becoming more efficient in 2021 and were able to make €33b gross profit more than in 2020. 

TTE is considered a dividend stock. Why is that? There isn’t much appreciation for your invested money. Look at this chart from the last 20 years and it is becoming very clear that the price stayed flat and the only profit is the 5.1% total annual return which most comes from the dividends.

What’s good about it is that it doesn’t lose value, stays flat all the time and you receive a considerably good dividend. The blended P/E ratio is 4.55 which is very very good, but almost better is to look at the PEG ratio which is 0.21!

(What is a PEG ratio and why it is better than the classic P/E?
Proponents of the PEG ratio allege that it is superior to the P/E ratio as a valuation metric because the P/E ratio does not consider the company’s earnings growth.)

The dividends why this stock is worthy to take a look at…

TTE has a record of 22 years of dividend paying and increasing. The current yield is 5.1% which is one of the best in the sector and next to the oil prices nowadays. Unfortunately, the dividend growth rate isn’t much especially the 10-year average as you can see on this spreadsheet.

Positive though the payout ratio. The payout ratio will show us if the dividend payout is manageable in the long term or not. I compare here the Operating cash flow to the dividend payout. TTE makes a good job here, I like to see this number under 75%; TTE’s payout ratio stays always under 50%.

Share buybacks can be a silent killer. If the company does not buy back shares but dilutes them then your investments are worth less over time. It is like a slice of cake where your slice will be smaller if the company dilutes its shareholders. Total Energie shares amount almost stayed flat in the last few years.

Last year they issued some but in 2020 they bought back some. Overall the dividend situation on this stock is very healthy and it will provide you with a good stream of cash flow.

Forecasting and future estimates  

Based on 24 analysts the estimated future earnings growth rate is 10.64%. Analysts have a scorecard also which tells me that they are 54% of the time right about the estimates and 15% of the time TTE has beaten the estimates.

Based on 3 Wall Street analysts offering 12-month price targets for TotalEnergies in the last 3 months.

The average price target is $68.00 with a high forecast of $69.00 and a low forecast of $67.00. The average price target represents a 31.12% change from the last price of $51.86.

Fair value

I use the most widely accepted method to calculate the fair value of a company which is the Discounted Cash Flow(DCF). It is based on the premise that the fair value of a company is the total value of its future free cash flows discounted back to today’s prices. I use analysts’ estimates of cash flows and assume the company grows at a stable rate into perpetuity.

(Total Equity Value = Present value of next 10 years cash flows + Terminal Value = $111.737 + $80.583= $192.320
Equity Value per Share (USD) = Total value / Shares Outstanding = $192.320 / 2.553= $75.34
Exchange Rate for USD/EUR: 0.982 = €73.99)

Undervalued by 31.5%. The current fair value is €73.99.

Risks and overall takeaway…

I have holdings in Chevron. I think Chevron is a big competitor in the US but in Europe, I see TTE as a reliable safe company for investors. They aren’t just for oil but for EVs also. 

Oil more likely will continue to rise, and it will drive TTE’s revenue and earnings. The numbers that I see here, in the past, the dividend coverage, the not-so-volatile stock price. The news about the future; everything tells me that it is a buy in my opinion.

Disclosure: I have no stock, option, or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

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