Russian companies to pay generous dividends in 2019
Shareholders of Russian firms are likely to enjoy generous dividends this year. While the average dividend yield in Russia is currently amounting to 6,8%, many companies are paying double-digit yields. Several state-owned companies, for example, are following the government's recommendation to pay out 50% of their earnings as dividends.
Russian corporates are set to distribute about 2 trillion rubles ($30 billion) in dividends this year, which is 153 billion rubles more than a year earlier, says bne IntelliNews citing VTB Capital (VTBC) investment bank. The main dividend flows are expected to come in the summer. According to the bank's estimates, companies are set to distribute 1,3 trillion rubles ($19,6 billion) between mid-July and late August. The remaining dividend flows will mostly come in the autumn.
At the moment, the average dividend yield in Russia is 6,8%, which is twice higher than the MSCI Emerging Markets Index of 3,3%. In December, Russia's dividend yield was even higher: it totalled a record 7,5%. By comparison, the country's sovereign Eurobonds are currently having a yield of 4,85%. Head of Equity Research, Metals & Mining at BCS Global Markets Kirill Chuyko considers that Russian firms are paying such generous dividends due to uncertainty caused by the US sanctions regime and the question of who will head the country in 2024. He assumes that investors are now reluctant to invest and want to simply take cash out.
A significant part of dividend flows is now generated by state-owned companies. In order to replenish the national budget, the Russian government has demanded that such companies pay out 50% of their earnings as dividends. Although many of the biggest companies, for example, Rosneft, managed to avoid the enhanced commitments citing their expensive investment programmes, several major enterprises including Sberbank obeyed.
The banking giant has acted as a locomotive of the growth this year showing an increase in the payout ratio to 49% from last year's 36%. VTBC expects Sberbank to pay up to 405 billion rubles for the whole year. Norilsk Nickel is meant to pay 260 billion rubles, while Gazprom's absolute payments are supposed to reach 239 billion rubles. Meanwhile, Tatneft is likely to show a decrease, as the oil producer has already paid 3Q18 interim dividends.
''We note that 14 companies from the top 15 with the highest absolute payments are exporters. Privately owned oil company Lukoil (163 billion rubles) and NLMK (109 billion rubles) have joined the leaders,'' says the bank in a note. The majority of exporters' dividends are above the Eurobond yield.