Russian companies seen paying some of highest dividends in emerging market world in 2017

Russian companies seen paying some of highest dividends in emerging market world in 2017
By Ben Aris in Berlin January 5, 2017

Russian companies pay some of the highest dividends in the emerging market world; Russian stocks are expected to pay a 4.9% dividend yield in 2017 on thier 2016 earnings, 2-4 percentage points more than their peers – and the companies that do pay well are amongst Russian portfolio investors’ favourites.

Gazprombank has released a list of its forecasts for the highest paying dividend stocks in 2017. Healthy dividends have been traditionally seen in the telecommunications, oil & gas, and metals & mining sectors, but this year some of Russia’s utilities are also expected to increase their dividends. In addition, an increasing number of companies are now paying dividends several times a year.

The biggest dividend story in 2017 will be whether the government finally manages to force Gazprom to pay out 50% of its IFRS profit as dividends. The company managed to ignore an order to do so in 2016 and paid out just 24% of its IFRS profits, but the cash-strapped government is turning the screws on all state-owned enterprises, and Gazprom is on the front line simply because of the amount of money involved. The 2017-2019 budget that was approved at the end of 2016 assumes a 50% dividend payout from all the state-owned companies, but the government has since said this is a "framework" and a final decision on who pays what will be made in April. A final decision on Gazprom dividends will be made then and if it does comply, then the payout will be in a range of RUB9.4-18.9 per share, offering a current dividend yield of 6.0-12.1%, says Gazprombank.

Lukoil and Gazprom Neft are expected to deliver decent annual dividends for 2016 earnings (over 5% yields) on the back of solid financial performance. Tatneft preferreds also offer a dividend yield of more than 5%. The dividend size for SurgutNG is yet to be determined, given that the company is forecast to post a net loss for 2016 due to forex effects. Yet even a RUB2 per share dividend on SurgutNG prefs suggests a current yield of above 6%, as the share price is down 8.7% yeat-to-date. Bashneft prefs offer a 10% dividend yield: the stock has been under pressure following the change of the controlling shareholder. Finally, Rosneft and Novatek should deliver annual dividends yields of below 3%, Gazprombank said in its report.

Telecom operators in 2017 should remain attractive dividend stories, offering annual yields of 7-11%, which are all well above the Russian average. Gazprombank highlights MegaFon as the most attractive dividend story following the sharp drop in its share price in 2016, due to exclusion from the MSCI Russia Index in November. MTS remains most stable and predictable dividend story, offering shareholders about RUB26 per share (RUB52 per GDR) in accordance with its dividend policy for 2016-18. Gazprombank also expects Rostelecom to pay dividends in 2017 slightly above the level paid in 2016 (RUB5.91 per share). Rostelecom pays the same amount of dividends on common and preferred shares, meaning that less-liquid preferred shares offer a dividend yield of about 10%, in line with mobile operators.

The only metals and mining names with high dividend payments are plays in the steel (NLMK, Severstal), diversified mining (Norilsk Nickel) and diamond (Alrosa) sectors, with dividend yields ranging from 8-9%. These dividends are strong compared with global rivals, as, for example, emerging market steel companies propose average yields of about 2%, while diversified miners propose 1.2%.

As a state company, Alrosa is expected to pay dividends totaling 50% of 2016 IFRS net income (35% of IFRS net income earlier), which, alongside improved net profit in 2016, should make Alrosa the industry’s dividend leader in 2017. Alrosa is a new dividend turnaround story in the sector.

Driven by the situation on metals markets, Norilsk Nickel has adjusted its dividend policy several times, with the last adjustment occurring at the beginning of April 2016. The company now enjoys a high dividend payout ratio (60% of Ebitda) if its net debt/Ebitda ratio is less than 1.8x (Gazprombank expects 1.3x as of end-2016).

The best dividend story in the utilities sector remains the Federal Grid Company (FGC), which could pay out up to RUB34bn, according to the federal budget draft. ROSSETI is a less clear play on dividends, as the company will likely collect dividends from healthy subsidiaries and redistribute this cash to those that need financial support in order to fulfill their investment programmes. Expected dividend yields for the two companies are 13% and 9%, respectively.

The best dividend stories among the generating companies (gencos) are Unipro and Enel Russia, which have dividend payout ratios of 80-100% and 55-65%, corresponding to average expected yields of 8% and 9% for 2016-18, respectively.

RusHydro will likely maintain its 50% IFRS payout ratio, implying a 6% dividend yield for 2016 earnings. Subsidiaries of Gazprom Energoholding are expected to pay out 35% of IFRS net income, implying yields of 6% for Mosenergo, 7% for TGK-1 and 4% for OGK-2. Inter RAO has indicated a 25% IFRS payout ratio, implying a dividend yield of 6% for 2016 earnings. Enel Russia remains an acquisition target and thus Gazprombank highlights the name as a top pick for next year. 

TOP dividend plays 2017

TICKER

CURRENCY

DPS

PERIOD

RECORD DATE

YIELD

O&G 

 

 

 

 

 

 

Gazprom

GAZP RX Equity

RUB

9.4-18.9

2016

20.07.2017

6.0-12.1%

Bashneft pref

BANEP RX Equity

RUB

137

2016

15.07.2017

10.10%

SurgutNG pref

SNGSP RX Equity

RUB

2.36

2016

18.07.2017

7.30%

Tatneft pref

TATNP RX Equity

RUB

13.1

2016

08.07.2017

5.70%

Gazprom Neft

SIBN RX Equity

RUB

10.9

2016

27.06.2017

5.20%

Bashneft ord.

BANE RX Equity

RUB

137

2016

15.07.2017

3.90%

Lukoil

LKOH RX Equity

RUB

112

4Q16

12.07.2017

3.30%

Tatneft ord.

TATN RX Equity

RUB

13.1

2016

08.07.2017

3.30%

SurgutNG ord.

SNGS RX Equity

RUB

0.6

2016

18.07.2017

1.90%

Rosneft

ROSN RX Equity

RUB

7.5

2016

27.06.2017

1.80%

UTILITIES

 

 

 

 

 

 

FGC

FEES RX Equity

RUB

0.2667

2016

July

13.20%

ROSSETI

RSTI RX Equity

RUB

0.1276

2016

July

9.90%

RusHydro

HYDR RX Equity

RUB

0.07

2016

May

7.50%

TGK-1

TGKA RX Equity

RUB

0.00084

2016

July

6.60%

Mosenergo

MSNG RX Equity

RUB

0.14

2016

July

5.70%

Enel Russia

ENRU RX Equity

RUB

0.0466

2016

July

4.50%

Inter RAO

IRAO RX Equity

RUB

1

2016

April

3.80%

TELECOM & MEDIA

 

 

 

 

 

 

MegaFon GDR*

MFON LI Equity

USD

1.04

2016-1H17

11.07.2017, 22.12.2017

10.50%

Rostelecom pref

RTKMP RX Equity

RUB

6

2016

10.07.2017

9.60%

MTS ADR**

MBT US Equity

USD

0.84

2016-1H17

07.07.2017, 13.10.2017

9.10%

Rostelecom ord.

RTKM RX Equity

RUB

6

2016

10.07.2017

7.10%

QIWI ADR***

QIWI US Equity

USD

0.88

4Q16-9M17

29.03.2017, 26.05.2017, 29.08.2017, 05.12.2017

7.00%

Sistema GDR****

SSA LI Equity

USD

0.44

2016-1H17

14.07.2017,  06.10.2017

5.00%

TRANSPORT

 

 

 

 

 

 

Aeroflot

AFLT RX Equity

RUB

9.9

2016

July

6.60%

CONSUMER 

 

 

 

 

 

 

Ros Agro

MVID RX Equity

RUB

27

2016-1H17

26.05.2017, 22.09.2017

4.40%

Magnit

MGNT RX Equity

RUB

420

2016-9M17

17.06.2017, 22.09.2017, 22.12.2017

3.90%

M&M

 

 

 

 

 

 

Alrosa

ALRS RX Equity

RUB

8.8

2016

19.07.2017

9.30%

NorNickel*****

GMKN RX Equity

RUB

865

2016

28.12.2016, 21.07.2017

8.20%

NLMK******

NLMK RX Equity

RUB

9.5

2H16-1H17

09.01.2017, 01.06.2017, 01.06.2017, 10.11.2017

8.20%

Severstal******

CHMF RX Equity

RUB

73.64

4Q16-9M17

05.07.2017, 04.07.2017, 04.07.2017, 15.09.2017

7.80%

FINANCIALS

 

 

 

 

 

 

MOEX

MOEX RX Equity

RUB

7.41

2016

16.05.2017

6.00%

Sberbank

SBERP RX Equity

RUB

4.7

2016

19.06.2017

2.70%

Sberbank pref

SBER RX Equity

RUB

4.7

2016

19.06.2017

3.70%

VTB

VTBR RX Equity

RUB

0.00117

2016

22.06.2017

1.60%

* MegaFon will pay $0.73 per GDR as of 2016 and $0.31 per GDR interim div. as of 1H17

** MTS will pay $0.45 per ADR as of 2016 and $0.39 per ADR interim div. as of 1H17

*** We expect QIWI to pay $0.22 per ADR every quarter from 4Q16 to 3Q17

**** Sistema will pay $0.22 per GDR as of 2016 and $0.22 per GDR interim div. as of 1H17

***** NorNickel will pay interim div for 9M16 of RUB444 per share and RUB 421 for the rest of 2016

****** NLMK and Severstal will pay dividends quarterly

 

 

source: Gazprombank

 

 

 

 

 

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