Pacific Investment Management Co., the world’s biggest manager of fixed-income mutual funds, is avoiding Russian state-owned companies as OAO Gazprom to OAO Transneft back down on higher dividends.
“We have a big focus on companies which pay big dividends,” Masha Gordon, manager of Pimco’s $573 million emerging-markets fund, said in an interview in Moscow yesterday. “In a country where it’s not clear what happens the day after tomorrow, we need the accelerated cash return as soon as tomorrow.”
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Russia started requiring state-backed companies to pay no less than 25 percent of net income as dividends in November, as the world’s biggest energy exporter grapples with capital outflows and the cheapest equities among emerging markets. While adhering to the rule, gas-export monopoly Gazprom is recommending a 2012 payout 33 percent lower than the year before after profit slumped. Transneft may pay out 25 percent of net income to international accounting standards in 2017, a company official said yesterday.
“The government set a task for state companies to pay dividends,” Gordon said. “It’s very important to see that Russia is sticking to its course.”
Newport Beach, California-based Pimco’s dollar-denominated EqS Emerging Markets Fund has lost 3.7 percent in 2013 and beaten 44 percent of its peers, according to data compiled by Bloomberg.
OAO Novatek, Russia’s biggest non-state natural gas producer, is one of the fund’s top holdings, equivalent to 2.4 percent of investments, the data show. The Tarko-Sale, Siberia-based company approved 6.86 rubles a share in 2012 dividends, according to a March 19 regulatory filing.
The fund’s other Russian stock holdings include second-largest mobile provider OAO MegaFon (MFON), steelmaker OAO Magnitogorsk Iron & Steel, X5 Retail Group NV (FIVE) and coal producer OAO Mechel (MTLR), according to the data.
Russia should take a differentiated approach to setting dividend levels at the biggest state companies depending on their industry and other parameters, Elvira Nabiullina, chief economic aide to President Vladimir Putin and incoming central bank chief, said in November.
State power producer Inter RAO UES signaled this week that it may not pay dividends for a second year after reporting a net loss of 22.8 billion rubles ($722 million) for 2012. Transneft, a Moscow-based oil pipeline operator, plans to pay a dividend equal to 10 percent of net income under Russian accounting standards for 2011 to preferred shareholders, Igor Dyomin, a spokesman for the company, said by phone May 24.
“Its that lack of consistency which is really hurting the equity market,” Gordon said during a conference hosted by Sberbank in Moscow yesterday. Pimco is focused on dividend-paying Russian stocks, she said.
Companies on Russia’s benchmark Micex (INDEXCF) Index trade at five times estimated earnings, the cheapest valuation among 21 emerging markets tracked by Bloomberg. The Micex rose for the first time in seven days, adding 0.2 percent to 1,338.43 by the close of trading in Moscow today and trimming a 3.4 percent decline in the week.
State-backed OAO Rosneft, Russia’s biggest oil company, acquired crude producer TNK-BP for $55 billion last month.
Rosneft’s plan not to buy out minority stakes in the company, to borrow money from it and possibly end its dividend policy sent shares of TNK-BP’s traded unit tumbling March 26. Investors including Prosperity Capital Management Ltd., which manages about $4 billion of Russian assets, said Rosneft is putting Russia’s reputation at risk.
Mark Mobius, executive chairman of Templeton Emerging Markets Group, said minority shareholders in Russia face a “very risky, unstable situation,” at yesterday’s Sberbank conference.
Russian First Deputy Prime Minister Igor Shuvalov said yesterday that Rosneft is prepared for discussion with minority investors in TNK-BP. Rosneft said in October that it will pay 25 percent of net income as dividends to its shareholders.
“Resolution of this issue will be an important sign of market development,” Pimco’s Gordon said yesterday.