MMK Rises to 19-Month High as Steelmaker Changes Dividend Policy

OAO Magnitogorsk Iron & Steel rose to a 19-month high after the Russian steelmaker controlled by billionaire Victor Rashnikov said it’s altering its dividend policy to use free cash flow as one of the bases for payout.

Shares in the company that’s also known as MMK climbed as much as 5.6 percent and traded 4.6 percent higher at 8.965 rubles by 11:11 a.m. in Moscow, the highest intraday level since March 2013, while the trading volume exceeded the daily average in the past three months by 43 percent. Russia’s benchmark Micex Index advanced 0.9 percent.

The revised, board-approved policy expands the options available to directors to include consolidated free cash flow or net income under Russian accounting standards as the basis to recommended dividends, MMK said today. Previously, the policy only promised payouts when the company reported consolidated net income, which is often affected by unrepeated items. The board recommended a nine-month dividend of 0.58 ruble a share with a record date of Dec. 23, the company said.

“We estimate MMK’s nine-month free cash flow at $400 million, so the current payout ratio is almost 40 percent of this figure,” Oleg Petropavlovskiy, an analyst at BCS Financial Group, said in a note. MMK’s dividend yield may be as high as 15 percent in future, he said.

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