Tatneft shareholders to get increased dividends after ADR conversion

Tatneft will pay shareholders in a big way

The intrigue around the dividend payments on Tatneft shares, which has kept shareholders in suspense for almost last week, has been unexpectedly revealed. Contrary to the general “decadent” sentiments of experts, the company's board of directors adopted a recommendation to pay interim dividends.

“The board of directors recommended shareholders to approve interim dividends for 6 months of 2022 in the amount of 32 rubles 71 kopecks for each ordinary and preferred share (3271% of the nominal value)," the company said in a statement published on the Tatneft website.

The recommendation has been submitted for approval by the extraordinary meeting of shareholders, which is scheduled for September 22. If approved, Tatneft will transfer 76,1 billion rubles for both types of shares.

Why more than a year ago?

Interim dividend payments this time are higher than in 2021. According to experts, in the first half of last year, the company accrued 16,5 rubles per share, directing 38,4 billion rubles. Thus, it is planned to double the interim dividends this year. The dividend yield on ordinary shares will be 8% per annum, and on preferred ones — 8,5%, which is higher than the rates on bank deposits.

A twofold increase in dividends is associated with the best financial results for the first half of 2022. According to the published RAS (Russian Accounting Standards) reports, the company's revenue increased by 42% compared to the same period last year — to 710,71 billion rubles, and net profit increased almost 2 times — to 152,16 billion rubles. The main reasons are the weakening of the ruble and the rise in oil prices on the world market. Given that 50% of net profit is allocated to dividends, as determined by the strategy of Tatneft, then payments for both types of securities automatically increased.

What analysts were afraid of

Where did the analysts' pessimistic forecasts come from? Literally on the day of the expected announcement of the decision of the board of directors of Tatneft, most experts were inclined to believe that payments could be cancelled or postponed to a later date.

“According to the dividend policy, the company directs at least 50% of net profit under IFRS or RAS to pay dividends, choosing a higher indicator. In such conditions, it would be possible to count on payments in the amount of 32,7 rubles per share (profitability of 8% and 8,5% on ordinary and preferred shares, respectively). These are attractive levels, but we believe that the company will refrain from paying dividends in the current unstable conditions," said Aleksey Golovin, an analyst at Promsvyazbank.

The main reason for doubt is the automatic conversion of American depositary receipts (ADR) into ordinary shares, which will lead to an increase in their number.

As a result, Tatneft's ordinary shares increased by more than 7% during trading on the Moscow Stock Exchange, preferred shares — by more than 9%.

“No information on dividends was received yesterday following the results of the meeting, and the market assessed this as a sign of non-payment, as a result of which the company's securities were under pressure. However, in fact, despite the concerns, the company decided to pay dividends. Their size is expected and amounts to 50% of the net profit according to the RAS. We believe that today, against the background of this news, the company's securities will look better than the market," Golovin said.