Pacific Investment Management Co., the world’s biggest manager of fixed-income mutual funds, praised a plan to lift Russian state companies’ dividends, while calling OAO Gazprom’s payout a “big test” of the proposal.
“We welcome this proposal, all investors would welcome it,” Masha Gordon, manager of Pimco’s $581 million emerging-markets equities fund, said by phone today. “The question will be what the difference will be between the proposal and implementation. Let’s see whether companies will continue to challenge the government and how effective the state is in terms of promoting its decisions through the boards of directors.”
Russia is considering an increase in dividends paid by state-controlled companies to 35 percent of profit to boost budget revenue, said three government officials with knowledge of the matter on May 8. 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 that is 33 percent lower than the year before after profit slumped. OAO Transneft may pay out 25 percent of net income to international accounting standards in 2017, a company official said on April 18.
Pimco is avoiding state-owned Russian companies as they back down on higher dividends, Gordon said in an interview April 18.
Gazprom’s board of directors will decide on the size of the dividend payout recommendation in the second half of May, Mikhail Rosseev, head of the consolidated financial statement directorate at Gazprom, said during an April 30 conference call. Management recommended paying 5.99 rubles a share in dividends for 2012, according to company spokesman Sergei Kupriyanov.
“A big test would be the decision by Gazprom’s board of directors,” Gordon said. If Gazprom’s board of directors doesn’t accept the management’s offer and boosts the dividend payout “there’ll be a higher chance of seeing a further dividend payout boost above 25%,” Gordon said.
State power producer OAO Inter RAO UES signaled on April 15 that it may not pay dividends for a second year after reporting a net loss of 22.8 billion rubles ($722 million) for 2012.
Companies on Russia’s benchmark Micex Index (INDEXCF) trade at 5.3 times estimated earnings, the cheapest valuation among 21 emerging markets tracked by Bloomberg. Russia’s 50-stock Micex 4.4 percent dividend yield compares with 2.7 percent for the MSCI Emerging Markets Index. The Micex retreated 0.6 percent to 1,418.26 by 2:48 p.m. Moscow today.
“We welcome this proposal because it introduces financial discipline for companies that historically distributed their cash streams incorrectly,” Gordon said.
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