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bne Invest
February 22, 2019 www.intellinews.com I Page 11
Russian dividend season about to open
Ben Aris in Berlin
Russian companies pay the highest dividends in the world. At the moment the average dividend yield is 6.8%, which is around twice that of the benchmark MSCI Emerging Markets (EM) index. With companies reporting their end of year earnings, boards across Russia are deciding how much of their gains they intend to share with shareholders.
“We expect the main dividend flows to come in the summer. Corporates are set to distribute RUB1.3 trillion ($19.6bn) between mid-July and late August, on our numbers. Payments for the whole year are to total RUB2.0 trillion ($30.3bn), we calculate, which is RUB153bn more than last year (the majority of increase comes from Sberbank’s number),” VTB Capital (VTBC) said in a note.
It is not clear why Russian owners are paying such generous dividends, but Kirill Chuykov, head of research at BCS Global Markets, told bne IntelliNews in a podcast that he believes it is the uncertainty caused both by the US sanctions regime and the question of who will replace President Vladimir Putin in 2024. As
a result, investors are unwilling to invest and so are simply taking cash out now.
The MSCI Russia dividend yield has been higher, but recently returned to below the 7.0% mark in January after printing a fresh record high of 7.5% in December. However, the Russia dividend yield has spiked after the recent sell-off. The more general MSCI EM dividend yield declined to 3.3%. That makes the spread between Russia and the
Russian corporates are set to distribute RUB1.3 trillion ($19.6bn) between mid-July and late August, on our numbers. Payments for the whole year are to total RUB2.0 trillion ($30.3bn)
rest of the emerging markets dividend yield as wide as 400bp – almost the widest it has ever been.
Put another way: equity investors into a portfolio of stocks with the current average yield can earn a 6.8% return that is locked in without the value of the shares changing an iota. That is more than the 4.85% that Russia’s sovereign Eurobonds are currently paying.
As usual, major flows are scheduled for the summer, when two out of the three rubles distributed in a year are allocated. The remaining dividend flows mostly come in autumn.
The state-owned companies are playing an in- creasingly important role in Russia’s dividend payout story. In addition to raising taxes on the biggest honey pot, mostly raw material producers, the cash-strapped government has demanded that they pay out 50% of their earnings as divi- dends. The Ministry of Finance has been trying to enforce the rule, but many of the biggest compa- nies, such as Rosneft, had begged off, claiming their heavy investment programmes make this impossible. However, several of the most impor- tant companies have been coughing up – the retail banking giant Sberbank first among them.
“For the whole year, Russian public companies are to offer RUB2.0 trillion, we believe, up
+8% from 2017, driving an additional flow of RUB153bn. The locomotive of the growth is Sberbank, with dividends up to RUB405bn on the back of a further increase in the payout ratio (to