Don't look now, but the Russian stock market is on a bit of a
bull run, and coincidentally, Gazprom (
) is set to substantially boost its dividend.
[caption id="attachment_59579" align="alignright" width="300"
caption="View from the rigging of Gazprom's Sahkalin-2 oil well in
the Okhotsk Sea"]
The widely traded Market Vectors Russia ETF (
) has gained a robust 14% over the past month, outperforming the 8%
rise in the MSCI global emerging markets index. Fairly impressive
considering oil prices have been more or less flat.
Russia could be making up some of its woeful underperformance
over the past year, as investors wrung their hands over Vladimir
Putin's approaching third presidential term and the possible
effects of a surprisingly vigorous protest movement.
Now that Putin is resettled comfortably in the Kremlin and the
streets remain peaceful, some mute acceptance if not enthusiasm may
be taking hold.
Capital flight from Russia fell
by more than two-thirds to $9.5 billion in the second quarter of
this year, from $33.9 billion in the January-March pre-election
period, according to official statistics. The country may
have even experienced net inflows in June, a significant sign
of the smart money calming down.
Russian shares could be in for a further boost thanks to an
unusual outbreak of investor-friendliness in the form of
blockbuster dividend payments (or promises to that effect) from the
giant state-controlled energy companies that occupy the largest
chunk of the market index.
Gazpromneft, the famous gas collosus' stand-alone oil division
(which used to be Roman Abramovich's Sibneft for students of
Russian financial history) got the ball rolling about a month ago,
hiking its 2011 dividend by 64% to 22% of earnings.
Top Russian oil producer Rosneft (
) soon followed suit, its heavyweight new CEO Igor Sechin promising
double the company's dividend
to 25% of profit. Now comes the turn of the big kahuna,
The Kremlin-controlled natural gas monopoly, which just happens
to be the world's most profitable corporation, has already been
distributing 25% of net income to shareholders. Gazprom execs made
headlines at their June 30 annual meeting by pledging to maintain
that hefty dividend through 2013, despite a rocky revenue outlook
as the global shale gas revolution undercuts prices.
But the real bombshell was hidden in the AGM remarks of
Gazprom's anti-charismatic CEO Alexei Miller. He explained the
Russian government had "asked Gazprom to consider" calculating its
dividend payments on the basis of the international accounting
standards known as IFRS, rather than the present yardstick of
Russian (ie ex-Soviet) accounting standards.
For reasons no sane person would want to understand in detail,
that would boost Gazprom's pay-out to shareholders by another 60%,
offering a dividend yield at current share prices of around 9.6%,
according to a note from UBS investment bank. That is enough to
make Gazprom a near world-champion in dividends as well as
ostensible value, with its price-to-earnings ratio still hovering
around a rock-bottom 3:1.
The company has lagged a bit behind the broader Russian rally
over the past month, its Moscow-listed shares gaining 8%.
That is, of course, if it all comes true. Investors have heard
many sweet promises from Gazprom before, including
progress on its mammoth exploration project
in the Arctic's Shtokman field, which remains stalled after decades
of supposed preparation. Miller pledges a breakthrough any day now
in the latest snarled negotiations with foreign partners Total (
) and Statoil (
Yet the Kremlin has at least one good reason to follow through
on big dividend hikes at the state-owned energy companies: the
government itself is the biggest shareholder. That means the
increase amounts to veiled taxes at a time when Putin is hunting
for revenue to fulfill simultaneous pledges of social largesse and
a considerable military build-up. Investors may be able to hitch a