Page 20 - RusRPTJun21

Dividend season
Against that the start of the dividend season will lead to some temporary weakness over the summer as international investors take their profits out of the country. Russian companies currently pay some of the most generous dividends in the world and international investor exchange these payments fro dollars and bank them abroad.
“The start of the dividend season is the key potential source of temporary pressure on the ruble,” VTB Capital (VTBC) said in a note. “This happens because Russian companies pay the lion’s share of dividends in rubles , while a significant share of dividend flow is attributed to ADR/GDR holders (hence, FX conversion is almost automatically executed). We estimate that in total Russian companies will pay around $27.4bn of dividends this year, of which about $7.0bn could be converted back into FX.”
All of Russia’s biggest state-owned companies have been ordered to pay out 50% of profits as dividends as the government has made a principle choice to tap earnings of these companies via dividend payments and not taxes.
The state-owned banking giant Sber (formerly known as Sberbank) will pay out some RUB400bn this week alone, VTBC says will led to $1.2-2.0bn of FX conversion as international investors take their profits home. The next peak of dividend payments falls on the second half of July and early August, says VBTC.
Offsetting the weakening effect big dividend payments have on the currency, the big export oriented companies – the oil, gas and metal companies, will have to sell dollars to buy enough rubles to pay the same large dividends which will push the ruble up, not down, and only a portion of it would be converted back to dollars.
“In this regard, we highlight that, according to our estimates, the total volume of corporate banking FX accounts has increased visibly in last 12 months to the levels of early 2018,” VTBC said. “In our view, this implies that the relative
20 RUSSIA Country Report June 2021 www.intellinews.com