PJSC Gazprom Adr. (OGZPY)

[mick]

Gazprom: A Chance At 11.7% Yield
Apr. 21, 2016 11:46 AM ET

http://seekingalpha.com/article/3966974-gazprom-gives-investors-chance-earn-11_7-percent-dividend-yield?auth_param=1ahnos:1bhhrni:c8d430fd1361499070336031c9c69ab6&uprof=46&dr=1#alt3

According to the decree of the Russian government for 2015, the state-owned companies will have to direct 50% of their net profits to dividend payment.

On the basis of this, I expect Gazprom's dividend payout in the amount of $ 0.57 per ADR.

Moreover, this practice can be extended for at least another two years.

I think that despite the rise in recent days, shares of Gazprom are still interesting for purchase.

On Monday, Prime Minister Dmitry Medvedev signed a decree according to which all state-owned companies must return to their shareholders not less than 50% of net profit under RAS or IFRS (depending on where the amount is greater). This document was published on the Russian government website. According to government estimates, this measure will provide additional RUB 100 bln to the budget.

In addition, the Ministry of Economic Development can support the idea of the Ministry of Finance to extend 50% dividend payout ratio for state-owned companies for three years. Formally, the proposal has not yet been reported to the Ministry, however, given the problems and challenges faced by the government during the period of low oil prices, the chances of an extension of this measure, I think are quite high.

In light of this event, a number of Russian shares become interesting for purchase under the season of dividend payments. However I would like to focus on Gazprom.

Shares of this company have long been the flagship of the Russian market. Each investment fund, which has limits on the Russian market, necessarily included Gazprom (OTCPK:OGZPY) in its portfolio. And now the news that dividend payments may be higher than previously expected becomes a strong driver for the growth of the company shares price.

50.23% of Gazprom's shares belong to the Russian Federation in the face of the Federal Agency for State Property Management (38.373%), Rosneftegaz (10.97%) and Rosgazifikatsiya (0.889%). In other words this company is subject to the governmental decree.

A week ago, Gazprom Management Committee reviewed the issues related to the preparation and holding of the annual general meeting of shareholders. It was proposed to pay 7.4 rubles per share, representing 43% of net profit under RAS or 50% after taking into account non-cash adjustments. Thus, it appears to be the minimum threshold for the amount of dividends this year.

For 2015 net profit under RAS amounted to 403.5 bln RUB. But profit under IFRS should be much more, because only for the first 9 months of 2015 net profit amounted to 673.9 bln RUB. At the end of 2015 I expect the net profit to be about 900 bln RUB. This means a good reason to expect dividends in the amount of 19 rubles per share, or $ 0.57 per ADR (at the rate of 66.1 RUB / USD), which at current prices gives a yield of 11.7% per annum.

Another question is that the Board of Directors has already given recommendations to the General Meeting of Shareholders about the amount of dividends, as well as appointed the date of meeting for 30-th of June. In light of this, I can't exclude that the AGM will approve dividends in the amount of 7.4 RUB per share ($ 0.22 per ADR). If so then another additional payment will be assigned and it will take place towards the end of 2016.

Overall, I think Gazprom's dividend yield looks very attractive, especially considering that the Government has a serious need to avoid a large budget deficit.
So the idea to approve a measure of paying dividends in the amount of 50% of net profit under IFRS or RAS will be still relevant in the coming years.

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