So far, 2023 has been a good year for shareholders in Banco Santander SA (LSE: BNC). The Santander share price has been on a roll, rising strongly since its mid-July 2022 low.
Indeed, Santander shares have jumped by 22.1% this calendar year, versus 2.9% for the FTSE 100 index. After such a strong outperformance, am I too late to get on board this Spanish giant?
Santander stock surges
As I write, the Santander share price hovers around 303p. This values the Spanish banking group’s London-listed equity at €56.8bn (£49.9bn).
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Here’s how Santander stock has performed over seven timescales:
| Current price | 303p |
| One day | +0.9% |
| Five days | +3.6% |
| One month | -8.6% |
| Year to date | +22.1% |
| Six months | +43.3% |
| One year | +14.4% |
| Five years | -31.7% |
What leaps out at me is how strong Santander shares have been over the past six months, rising by almost half. However, over five years, they have lost almost a third of their value. Then again, owning European bank shares over the past half-decade has largely been a thankless task.
Note that the above figures exclude dividends — the regular cash payouts paid by some companies to shareholders. For European banks, these cash returns can add several percentage points to yearly returns.
At its 52-week low, the Santander share price dived to 193.42p on 14 July last year. It then skyrocketed, hitting a 52-week high of 343.5p on 8 March. Since then, it has eased back by 40.5p, down 11.8% from this peak. So would now be a good time for me to buy this stock?
Would I buy Santander shares today?
Buying this stock today would give my portfolio exposure to three geographical regions, namely Europe, North America, and South America. And in its latest full-year results, Santander reported earnings growth of nearly a quarter (23%).
Despite this robust growth in both developed and developing markets, Santander shares look undervalued to me. They trade on a price-to-earnings ratio of 6.3, which translates into an earnings yield of 15.8%.
Furthermore, the bank’s cash dividend looks rock-solid to me. The dividend yield of 3.4% a year lags the FTSE 100’s yearly cash yield of around 4%. However, it is covered a whopping 4.7 times by earnings, which seems like a huge margin of safety to me.
To be honest, I’m slightly annoyed that I don’t already own Santander shares. Alas, my focus on the shares of the UK’s Big Four banks blinded me to the opportunities on offer from this leading European lender.
To correct this oversight, today I added Santander stock to both my watchlist and my buy list. As a value/income/dividend investor, it ticks all of my boxes for inclusion in my family portfolio. Indeed, if I had any spare cash, I would buy this cheap share straight away!
