Page 109 - RusRPTJun21

In contrast to 2020, when the payment of SOE bank dividends shifted to October, the main payments should be concentrated at the end of May and in July. While we could see more support for the ruble during the summer months thanks to more conversions to rubles by exporters to pay out dividends, we see risks to Russia’s dividend yields from government initiatives to incentivize the spending of passive income in Russia rather than sending it abroad.
• The first warm months of the year are usually associated with the start of intense dividend payments. Based on the MOEX Broad Market Index and our coverage, we have estimated the dividend payments to be made in 2021 and laid out a schedule for dividend payments until YE21.
• Despite COVID-19, Russian companies managed to raise their total dividend spending this year thanks to favorable commodity prices in 2H20-1H21. As a result, we estimate that publicly traded stocks could pay out more than RUB2.9trln in dividends, 8% more than in 2020 and 7% more for minority shareholders in ruble terms. Investors will likely see an increase in dividend payments in terms of US dollars as well (+5% y/y and +3% y/y, respectively). On our estimates, Sberbank, Lukoil, Gazprom, Rosneft and Norilsk Nickel should pay out the most in dividends.
• Dividends remain crucial for Russia’s equity market investment case. Across FactSet indices, Russia continues to deliver one of the highest dividend yields in the EM universe at 5.3% vs. 2.5% for EMs.
• Looking at the seasonality of payments, the schedule is now “back to normal” after COVID-19, with Sberbank likely paying out dividends again at the end of May instead of in October 2020, and it will likely be the only week dominated by non-export payments. The remaining weeks should be dominated by exporters. Weeks of heavy payments will occur in mid-June and at the end of July. Traditionally, the end of October can be intense given that some Oil & Gas and Metals & Mining companies pay out dividends on a quarterly and semi-annual basis.
• Within ownership structures, most dividend payments by public companies in Russia will be directed to majority stakeholders (31.2% of total dividends) and to minorities and other shareholders (33.3%). The Russian state both explicitly (direct control) and implicitly (stakes or control via SOEs) receives 23% of dividend payments.
• In contrast to last year, the downside risks to our dividend payment scenario stem from the regulatory environment rather than the economic shock. The main issue for now is private companies and their payments to major shareholders. With Norilsk Nickel fined for ecological damage and steel companies under investigation by the FAS, authorities are now considering disincentivizing companies from paying out large dividends offshore. This could be the case for many privately held Russian companies that have parent companies in former low-tax jurisdictions.
109 RUSSIA Country Report June 2021 www.intellinews.com