Gazprom Dividend Wagers Help Lift Russian Stocks Toward Record

  • Natural-gas export monopoly climbs after 50% payout order
  • Ruble little changed as price of crude oil falls 1.9 percent

Russian stocks edged toward a record high as the possibility of a bigger dividend payout at Gazprom PJSC stoked appetite for the natural-gas export monopoly’s shares, helping lessen the impact of a decline in oil prices.

Gazprom jumped as much as 4.1 percent to 162.30 rubles per share, the highest intraday level in more than a year. The 50-stock Micex Index, where Gazprom has the biggest weighting at 16 percent, added 1.1 percent to 1,951 at 5:50 p.m. in Moscow, trading 0.7 percent off a record. The ruble was little changed.

Confronted by the biggest budget deficit in six years and grappling with a second year of economic contraction, the Russian government has instructed state-controlled companies to pay out at least 50 percent of their income in dividends. While oil fell on Wednesday, stocks and the ruble in the world’s biggest energy exporter have been supported by crude’s rebound from a 12-year low since January.

“It’s the combination of a fashion for Russian stocks on the back of rising oil and loose monetary policies and yesterday’s announcement on dividends," Alexander Losev, chief executive officer at Sputnik Asset Management in Moscow, said by e-mail. "This triggered people to close the permanent underweight in Gazprom."

Gazprom’s 30 percent rally since Jan. 18 has allowed it to reclaim the position of the largest Russian company by market capitalization, which it ceded to Rosneft on April 11.

According to the government order issued on Tuesday, state companies must pay out half their income under Russian or international accounting standards, whichever produces the higher figure. Gazprom’s management has already recommended a 2015 dividend at 7.40 rubles per share, which is 50 percent of income according to Russian standards. Should the company pay out the same proportion under IFRS, then last year’s dividend will jump to 15 to 20 rubles per share, implying a 10 percent yield, Sberbank CIB analysts said in a note.

Gazprom may show the best dividend yield among common stocks in the sector as a result, JPMorgan analyst Sergei Arinin said in a research note.

"Conversations with investors indicate Gazprom is widely under-held, so a substantial move into the stock is possible," Ronald Paul Smith and Alexander Bespalov, analysts at Citigroup Inc., said in a research note.

The ruble traded at 66.1070 per dollar as Brent crude retreated 1.9 percent. The currency has been supported thanks to companies which need to pay 580 billion rubles ($8.8 billion) in taxes by April 25, according to Sberbank CIB. The ruble’s correlation with oil declined to 0.75 from 0.82 on Tuesday. A value of 1 would mean the assets are moving in lockstep. Oil and natural gas account for about a third of Russia’s budget revenue and almost 60 percent of exports.

Government five-year bonds rose, pushing the yield down three basis points to 9.27 percent. The Finance Ministry sold out two bond auctions, raising 25 billion rubles with the aggregate demand coming in at 99.8 billion rubles.

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