Russia's Gazprom could surprise on 2020 dividends

The management of Russian gas giant state-controlled Gazprom is considering recommending a dividend of over RUB12 per share for 2020, which would translate into 50% of net profit payout, according to Interfax.

As reported by bne IntelliNews, despite the losses sustained in 2020, the market expected the company to stick to the current dividend plan despite the strain on finances. Gazprom has previously reiterated its dividend policy, but now could reportedly surprise the market with a higher payout.

"Gazprom's recommendation could be about 30% higher than we had expected," Sberbank CIB commented on April 14.

Even though the difference in yields is moderate, this means that the management could decide to raise the payout ratio to 50% or even slightly higher one year earlier than previously planned, Sberbank CIB analysts note.

Based on the approved current dividend policy Gazprom could still pay at least 40% of 2020 adjusted net income this year and at least 50% of 2021 adjusted net income next year. 

But "by proposing what is likely a 50% payout on 2020, Gazprom’s management board has handily exceeded even the most optimistic of analyst expectations," BCS Global Markets commented on April 14, while affirming a Buy call on Gazprom's shares. 

BCS GM estimates that RUB12.5 (USc16.0) per share payout would make a "respectable 5.6% dividend yield on what was a very difficult year".

"If the dividend recommendation is confirmed we would consider this as a further positive step and would represent reassurance that the management sees a strong global gas market outlook," Sberbank CIB analysts wrote.

BCS GM analysts remind that a higher than expected dividend payout is one of the three catalysts they have anticipated from Gazprom.

The other two potential catalysts are upward revisions of earnings and dividend expectations for 2021 due to the improved outlook on the European gas market, as well as the physical completion of Line A (early fall) and Line B (early summer) of Nord Stream 2 pipeline to Germany, lowering event risk around Gazprom's shares.

In December 2020 BCS Global Markets "enthusiastically confirmed" a Buy call on Gazprom. The analysts noted that exports are recovering faster than expected after a tough year, with European exports seen returning to normal by 2023. 

VTB Capital (VTBC) in December 2020 also upgraded the investment case on Gazprom, arguing that the entire gas futures price curve is moving up and that the company's shares are yet to reflect this.