Tatneft continues to accelerate capitalization: 100% of net profit to be directed on dividends

Old tales about Tatneft

Tatneft has announced the decision of the board of directors, which intrigued many with the initiative of the company's top management to convene an extraordinary meeting of shareholders. The message indicated that the agenda had yet to be approved, which would be followed by the coordination of other organizational issues — the date of the meeting, the date of closing the register of shareholders entitled to participate in it. In short, the news with a touch of sensationalism had many gaps.

However, the very fact of the forthcoming convening of an extraordinary meeting of Tatneft still has become a reason for new rumours about its possible sale. A number of media again started to talk about the sale of the independent regional company to the state structures of Rosneft under the Bashkir scenario.

Tatneft got off with dividend recommendations

However, in reality, it has turned out to be the opposite. Tatneft has recently published the decisions of the August meeting of the board of directors, which actually made recommendations on the payment of interim dividends for the first half of 2019. This will be the only item on the agenda of the extraordinary meeting, scheduled for September 13.

The board of directors is proposed to pay dividends in the amount of 40,11 rubles per one ordinary share and one preference share. 100% of net profit, or 93,3 billion rubles, will be directed for these purposes. According to the announcement, the general meeting of shareholders is offered to approve the payment of interim dividends for 6 months of 2019 in the amount of 4,011% of the nominal value of shares of each type (40,11 rubles per one share with a nominal value of 1 ruble). For comparison, in the first half of last year, Tatneft paid dividends in the amount of 30,27 rubles for all types of shares, directing 75% of the company's profit, or 70,4 billion rubles, for these purposes. Thus, Tatneft has increased its dividend payment by 47%, Finam investment company experts calculated.

“In determining the size of the dividend for 6 months of this year, the board of directors relied on the dividend policy of the Company, based on the results of activities for the reporting period, took into account the forecast of free cash flow and available sources of financing for the operating and investment activities of Tatneft Group,” the company reported in the press release.

The board of directors proposed to approve September 27, 2019, as the date on which the persons entitled to receive dividends for the first 6 months of 2019 are determined.

“In accordance with the Charter, the owners of preference shares are entitled to receive an annual fixed dividend of 100% of the nominal value of the shares, unless otherwise decided by the general meeting of shareholders (the nominal value is 1 rub),” Solid investment company noted. “Therefore, a recommendation of the board of directors is required to pay dividends on ordinary shares. Earlier, it was paid approximately 30% of the profits under Russian Accounting Standards (RAS). According to the new dividend policy adopted at the beginning of 2017, Tatneft will pay at least 50% of profit under IFRS or RAS, depending on the larger amount. Interim payments are possible for 3 months, 6 months and 9 months. In fact, for 2017, about 70% of the profits were recommended. At the end of 2018, the company distributed all free cash flow to dividends due to negative net debt. Most likely, the company will continue to pay all free cash flow as dividends.”

Blue chip yields jumped from 3,5% to 6%

According to Finam experts, the yield on ordinary shares will be up to 5,6% and 6% on preference shares. In 2017, dividends calculated by the results of 2016 amounted to 22,81 rubles, which corresponded to a yield of 6,18% per annum, Equity.today experts say. Until that time, the yield on Tatneft securities did not rise above 3,52% per annum (in 2016, payments amounted to 10,96 rubles per ordinary share, and from 2006 to 2014 dividend payments to holders of ordinary shares of the Russian oil company ranged from 1 to 8,6 rubles per ordinary share).

Analysts explain the growth of dividend payments with excellent financial results. “We believe that the main reason for such a generous recommendation for dividends is the strong financial results for 1Q19, as well as for 2Q19 (to be published by the end of August), which should be positively affected by some improvement in the situation and growth in hydrocarbon production,” Finam experts indicate.

The preference shares also grew significantly in the two hours since the announcement of the recommendations. Since Tuesday morning, they were quoted at the level of 661,4 rubles per share, and by 12 o'clock jumped to 676 rubles, the expert said. But then returned to the original level to 667 rubles. Thus, Tatneft continues to accelerate the capitalization of the company, which jumped by 2 billion rubles.

Recently, Tatneft securities have fallen by 3,02% on the general background of the fall in the value of shares of oil and gas companies. “This has been facilitated by external factors: the escalation of the trade war between the US and China provoked a large-scale sale on the world markets,” Solid analysts said. “Plus, the new package of US sanctions only exerted additional pressure. RTS Index fell by 3,95% and closed below 1,300 for the first time this summer. The Russian national currency fell by about 1 ruble to 65,3 against the USD.”