Tatneft rises in price because of love to shareholders

The company's stock hits a fresh all-time high against the backdrop of the news about record dividends

Tatneft rises in price because of love to shareholders Photo: tatneft.ru

Tatneft share price has hit a fresh all-time high against the backdrop of the news about record dividends for 9 months. The company recommended to pay the shareholders three-quarters of the profit under RSBU [Russian accounting standards], whereas previously it paid dividends of not more than a half. Although the long-term dividend policy of Tatneft is still a riddle, the current solution seems quite logical, experts say. Read the details in the material of Realnoe Vremya.

Unprecedented generosity

On Monday, Tatneft stock rose in price to a new high amid reports about dividends. Earlier, the company's board of directors approved the recommendations to the extraordinary meeting of shareholders (to be held on 12 December) on the interim dividends for 9 months of 2017. They proposed to pay 27,78 rubles for one ordinary and privileged share.

It is more than it has been paid ever before: in 2016, the company paid 22,81 rubles per share, a year earlier — 10,96 rubles. According to current dividends, the yield may reach 2778% (by dividends for the year 2016 it was 2281%, for the year before — 1096%).

Nail Maganov promised in December to present to shareholders the financial strategy for the next five years, which, in particular, will contain proposals on investment and dividend policy. Photo: Maksim Platonov

In total, the board of directors recommended to allocate for payments to shareholders 75% of net income under RSBU — that is, 64,6 billion rubles (the profit for January-September amounted to 86,17 billion rubles). Tatneft used to pursue a progressive dividend policy as well, but the profit was not distributed this way before. For example, in 2016 it was paid 50% of the profit under IFRS as dividends, for today it is the maximum.

Director General of Tatneft Nail Maganov promised in December to present to shareholders the financial strategy for the next five years, which, in particular, will contain proposals on investment and dividend policy. It is unknown whether the company will continue to allocate 75% of the profit on dividends. The press service of Tatneft to the request of Realnoe Vremya has not answered yet. In August, it commented on further increase of payments to shareholders of the company the following way, ''It is possible, but the main thing — to lay the principle of determining the dividend payments.''

Expensive like never before

On the backdrop of the news about the record dividends, Tatneft stock has grown in price. On 7 Novemeber at around 3:20 PM MSC at the Moscow stock exchange, the price of ordinary stocks reached 482,9 rubles — for the company it is an absolute historical maximum. The growth continued throughout the first half of the day, however, then it began a slight correction. However, from 2:00 PM they again began to rise. From 4:00 PM, the growth reached 9,7%. In October, Tatneft stocks were traded in different ways, 11 out of 22 trading days were closed with a minus.

Large dividends look like a reasonable step for Tatneft so far, deputy director of the corporate rating group AKRA Vasily Tanurkov says. The hardest part of the investment program, including costs incurred at TANECO, should be completed this year. Tatneft invests in production not very much, although it is growing. The more that the very possibility of investment in production will be limited if OPEC+ pact is extended to 2018. ''In these circumstances, it is logical that the company pays high dividends,'' the expert says.

Tatneft invests in production not very much, although it is growing. Photo: tatneft.ru

Deputy director of Finam group of companies Yaroslav Kabakov agrees with him, ''When it is necessary to withdraw profit from the company, one of the solutions is dividends. Of course, it may negatively affect further development from the point of view of funds upgrade, new projects. On the other hand, this has a positive effect on capitalization of the company.''

At the same time, it is necessary to understand how much Tatneft expects to earn by the end of 2017, preferably under IFRS, Tanurkov continued. Large interim dividends can always be offset by lower annual ones, he explains. However, the expert does not exclude that this year the company may decide to pay more than half of the net profit under IFRS.

By Artyom Malyutin