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8.3.2 Dividends dynamics
Russia's Finance Ministry still expects the state-owned enterprises (SOEs) to pay the required 50% of IFRS profit in dividends despite the coronavirus (COVID-19) crisis, Reuters reported on July 3 citing the deputy minister Vladimir Kolychev.
As reported by bne IntelliNews, the ministry succeeded in forcing the 50% payout ratio on almost all the country's largest corporations, such as Rosneft, Transneft,state-controlledbanksS berbankandVTB.
Kolychev noted that dividend expectations still apply to all state majors and state banks. Previously Sberbank and VTB Bank, country's two largest banks, were allowed to assess the need for provisions and push shareholder meetings to autumn, but the Finance Ministry expects compliance with the 50% payout rule, he said.
However, most recent reports suggested that Russian Railways (RZD) and Transneft oil pipeline operator so far lack clear decision on 2019 dividend payout.
According to Kolychev, Transneft would be able to postpone the payment, but his ministry will insist that the dividends be paid in full. "It seems to us as Transneft is affected by COVID-19 to a lesser degree. The revenues of the company consist exclusively of tariffs," he argued.
However, the Opec+ deal would indeed affect the sector and budget at large through lower oil output. The deputy minister estimated that 1.2% of GDP would be lost on lower oil output in 2020 and 2021 each.
Budget deficit in 2020 is still seen at about 5% of GDP in 2020, given that the anti-crisis stimulus package will be realised in full.
BCS Global Markets has added preferred shares of Sberbank and shares of Unipro utility major to its Basket of Top 5 Russia Dividend Names, while removing Mobile TeleSystems (MTS) and Magnitogorsk Iron and Steel Works (MMK) mobile and metals majors, the analysts wrote on July 3.
As reported by bne IntelliNews, in part on high dividends, Russian equities in 2019 were the best performing in the world, with the benchmark MSCI Russia index returning a whopping 44% as of end of November, as compared to a MSCI EM (emerging markets) gain of 12% and developed markets growth of 22%.
The BCS GM basket carries 12-month forecasted dividend yield of 11.1%. The reshuffled dividend basket also includes Surgutneftegas oil dinosaur, N orilsk Nickel metals major, and private oil major Lukoil.
Overall dividend appeal of Russian equity waned somewhat with the coronavirus (COVID-19) crisis, with number of names offering dividend yields (DY) of over 6% with Buy or Hold recommendation down to 13.
"Sberbank preferred shares are added to the Basket, as we see a very high chance of Sberbank sticking to the previously announced 50% payout with DPS [dividend per share] RUB18.7, providing 10% DY on prefs," BCS Global Markets commented. Unipro's expected 12-month DY is almost 10%.
"MTS remains a top dividend yielding Telecom name, yet we find the stock fairly valued on a 12M horizon at 2020 estimated 5.1x Enterprise Value/Ebitda," BCS GM wrote, noting the dividend yield that remains solid at 9%, but with limited upside to the payout seen in the mid-term. The case for
71 RUSSIA Country Report August 2020 www.intellinews.com
