Page 77 - bne IntelliNews Country Report: Russia Dec17

Sberbank’s Supervisory Board might consider an increase in the dividend payout ratios from 25% in 2016 to 35-40% in 2017 and 50% in 2018. The Board is considering a new three-year strategy for the bank that is to be presented on 14 December 2017 at a Strategy Day in London. We forecast the dividend payout ratios at 35% in 2017 and 45% in 2018. In 2017, our assumptions imply dividend yields of 5% for ords and 6% for prefs. These leaks are strongly supportive of our capital return thesis and we see the initial strong reaction (the stock was up 5% yesterday) as only the beginning of big re-rating closer to the CE3 dividend players i.e. Pekao and Komercni banks, which trade at a 6% dividend yield vs. Sberbank’s 2yr FWD of 10+%. Sberbank remains our high conviction Buy call with a change in the dividend policy to attract a new class of buyer (i.e. global dividend funds) into the stock. Separately, prefs offer an attractive alternative, although the increased dividend payout makes the case of a prefs buyback stronger, in our view.
Gazprom Neft’s Board of Directors has recommended interim dividends for 9mo17 of RUB 10/share , according to Interfax. The shareholders are to vote on the dividends at the EGM on 15 December. The record date for dividends has been set as 29 December. The recommended interim dividend payment of RUB 10/share is slightly above our expectation of RUB 9.6/share and implies an interim dividend yield of 3.8%. If the company’s proposed interim dividends are based on a 25% payout of IFRS net income for 9mo17 (as suggested earlier by Interfax), we calculate that Gazprom Neft might report net income of RUB 78bn (USD 1.3bn) for 3Q17, which would imply QoQ growth of 59% and 54% in rouble and dollar terms, respectively.
8.3.3 Russia’s best paying dividend stocks
Russia’s summer dividend payout season is over so its time for investors to look forward to the next one .
High yielding dividend stocks have been consistent index outperformer nearly every year since 2014 and so the list of generous companies is the first list investors look at when making equity investments into the Russian stock market.
Russia’s stock market had a stellar year in 2016, returning over 50% to portfolio investors, who had decided prices were simply too cheap to ignore – and helped at the end of that year by a “Trump bump” on speculation the newly elected US president might withdraw sanctions early.
The market has done less well this year selling off by about 14% in the first quarter, but as Russia’s economic recovery gathers momentum, albeit modestly, investment into the best names has been trickling back.
The ruble denominated Moscow Interbank Currency Exchange (MICEX) is down YTD by 7%, while its sister index the dollar denominated Russia Trading System (RTS) is down by 3% since the start of the year. Most analysts believe the index will continue its slow recovery and could return 10%-15% by the end of this year.
One clear sign of the growing interest in Russian stocks is the reappearance of IPOs . In the last few weeks Russian oligarch Oleg Deripaska got the first London-based IPO away in five years with the listing of his EN+
77 RUSSIA Country Report December 2017 www.intellinews.com