Russia’s dividend yields are soaring to a four-year high as companies from OAO Surgutneftegas to OAO Lukoil bolster cash payouts to entice investors to the cheapest stocks among emerging markets.
Moscow’s Micex Index has an average dividend yield of 4 percent, the highest level since March 3, 2009, according to data compiled by Bloomberg. The yield for companies in the Bloomberg Russia-US Equity Index of the most-traded Russian stocks in New York has more than doubled to 4.3 percent from 1.6 percent in July, the data show. RTS Index futures rose 0.7 percent in U.S. hours yesterday to 140,850.
Surgutneftegas offers a 12-month dividend yield of 9.8 percent on its preferred American depositary receipts, the most among Russian U.S.-listed stocks, while Lukoil, whose Moscow shares yield 5.9 percent, said this month that it will look at boosting payouts from last year’s 23 percent of net income. Russian stocks trade at 5.3 times estimated earnings, the cheapest among 21 developing nations tracked by Bloomberg.
“Many companies are taking a course toward higher dividends as Russian equities are extremely undervalued,” Igor Nuzhdin, an analyst at Alfa Capital Management, which manages 80 billion rubles ($2.6 billion) of equities and fixed income, said by phone from Moscow yesterday. “They try to lure investors, give them some predictability and reduce their risks by increasing dividends. Investors like dividends.”
The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, was unchanged at $27.46 yesterday in New York, remaining at the lowest level since Nov. 28. The RTS Volatility Index, which measures expected swings in the stock futures, declined 2 percent to 20.15. The Bloomberg-Russia gauge slipped 0.2 percent to 96.84, the lowest since Dec. 10.
Surgutneftegas is trading at a 32 percent discount to the MSCI Emerging Markets Energy gauge, which includes producers such as Petroleo Brasileiro SA and PetroChina Co., data compiled by Bloomberg show. Its preferred shares in Moscow have a 12-month dividend yield of 10.2 percent.
Lukoil, the nation’s second-biggest oil producer after OAO Rosneft, will consider boosting dividend payout ratios from next year when investment demands ease, Chief Executive Officer Vagit Alekperov said in London on March 7. The Moscow-based company is looking to boost shareholder payments to 30 percent of profit in the medium term, he said.
In November, Russia approved regulations requiring state companies to pay no less than 25 percent of their net income in dividends.
“Investment risks are high and it is natural that payouts are increasing,” Alex Kantarovich, head of Russian equity research at JPMorgan Chase & Co. in Moscow, said by e-mail yesterday. “Among cash-rich companies, the government-controlled corporations are known for paying too little, a drag to their valuations. On the positive side we should highlight the mobile operators, with dividend yields in the high single digits, definitely increasing the attraction.”
Dividend yields are calculated by dividing annual dividends per share by the price per share and expressing it as a percentage.
Mobile TeleSystem’s board will meet next month to determine the size of 2012 dividends, Chief Financial Officer Alexey Kornya said in Moscow on March 19. Management will propose paying dividends of at least 18.3 rubles, or 59 U.S. cents, a share, for a total of $1.2 billion, he said. MTS, as the company is known, posted net income of $1 billion last year.
MTS’s ADRs climbed 0.3 percent to $20.58 in New York yesterday, offering a 12-month dividend yield of 4.4 percent. The ADRs settled at a 16 percent premium to the company’s Moscow-listed shares, the biggest gap in a week. The company’s Moscow stock offered 12-month dividend yield at 5.4 percent, data compiled by Bloomberg show.
OAO Sberbank, in which the Russian central bank has a 50 percent plus one share stake, will pay an “unprecedented” dividend amounting to 17.3 percent of net income, Chief Executive Officer Herman Gref said in Moscow on March 22.
ADRs of Sberbank, which held 46 percent of Russia’s retail deposits at the end of 2012, rose 0.2 percent to $12.73 in New York after reaching the lowest level this year on March 25. The company’s 12-month dividend yield was at less than 2 percent. Sberbank’s Moscow share, which offers 12-month gross dividend yield of 2.1 percent, slipped 1.6 percent to 97.13 rubles, or $3.14, in Moscow yesterday. Each ADR represents four shares.
Turkey’s Denizbank AS, owned by Sberbank, submitted the sole offer for Citigroup Inc.’s Turkish retail unit after rivals decided against bidding for the assets, two people familiar with the matter said yesterday. Sberbank bought Denizbank in June last year for $3.8 billion or 1.3 times book value. Sberbank shareholders have voiced concerned whether the Citigroup deal is needed after last year’s Denizbank acquisition, one of the people said.
Ruble futures showed the currency weakening 0.2 percent to 31.95 per dollar in U.S. hours. Russia’s ruble advanced 0.2 percent to 30.852 per dollar yesterday and gained 0.2 percent to 34.8302 against the dollar-euro basket used by the central bank to manage swings that erode exporter competitiveness.
Crude oil for May delivery rose 1.6 percent to $96.34 a barrel on the New York Mercantile Exchange yesterday, the highest settlement since Feb. 19. Brent oil for May settlement increased 1.1 percent to $109.36 a barrel. Urals crude, Russia’s major export oil blend, fell 1 percent to $107.01 per barrel.
United Co. Rusal, the world’s largest aluminum producer, dropped 2 percent to HK$3.94 in Hong Kong trading as of 11:28 a.m. local time. The MSCI Asia Pacific Index rose 0.1 percent.