July 2 (Bloomberg) -- Investors should sell Russian “cash eaters” such as OAO Gazprom and buy “cash cows” including OAO Mobile TeleSystems because the global crisis has increased the allure of dividends, Troika Dialog said.

“The Achilles heel of the Russian market is its very low level of cash generation for shareholders,” Troika analysts led by chief strategist Kingsmill Bond said in a report today.

Traded Russian companies as a whole haven’t produced so- called free cash flow in at least four years because of capital expenditures, according to Troika. The average percentage of earnings paid to shareholders in cash this year will probably be 18 percent, one of the lowest ratios of any emerging market, Troika said.

“The payouts that have so far been made to shareholders are minimal,” Bond said by phone. “It goes to the heart of the weakness and fragility of this market.”

Gazprom, the world’s largest gas producer, and other state- run companies such as pipeline operator OAO Transneft and hydropower generator OAO RusHydro seem unable to generate significant cash or unwilling to share it, Bond said. “Transneft is the classic example of such a company, but Gazprom and the utilities have clearly fitted into this category in the past, and we have yet to see clear evidence of change.”

Mobile TeleSystems, or MTS, potash miner OAO Uralkali and natural-gas producer OAO Novatek are among the companies that “have both the ability to generate free cash flow and the desire to pay it out,” Troika said. “The crisis is increasingly focusing attention on this issue.”

To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net

Last Updated: July 2, 2009 02:11 EDT