The new dividend policy of Tatneft

What it means

The Board of Directors of Tatneft has approved a new dividend policy. Summary of changes:
Changes summary

More on changes

Prior to changes. Tatneft paid shareholders a certain share of the par value of the stocks (22818% at the end of 2016 — 22.81 rubles), but the rules for the amount formation were not fixed. Usually payments were made annually, although the frequency had to be approved by the Board of Directors.

#background At the end of 2017 Tatneft paid interim dividends — for 9 months — for the first time in 13 years. Their volume amounted to 75% of the profit for the period. The company named the successful implementation of the "Tatneft Group’s Development Strategy 2025" and the forecast of net cash flow as a reason

After the changes. The company fixed the target level of dividends — at least 50% of net profit under RAS or IFRS, whichever is greater. The Board of Directors, as it was before, may propose the approval of interim dividends for three, six or nine months.

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Reasons for changes

Analyst of the "Aton" company Alexander Kornilov:

"Tatneft had for a long time adhered to the conservative rule: dividends have amounted to 30% of net profit under RAS. In recent years the company almost completely got rid of debt and began to generate a solid free cash flow after the launch of the Taneco refinery and the growth in the production of extra-viscous oil with tax breaks and high margins."

Earnings per share, dividends per share and Tatneft’s debt load (sources — finanz and the site of Tatneft):
The ratio of dividends to profit and the price of Tatneft’s ordinary shares:
Dividends and stock price
Analyst of Raiffeisenbank Andrey Polishchuk:

"After last year [Tatneft] announced a large interim dividend, it became clear that it is focused on the distribution of free cash flow. It’s very good that they put it in the dividend policy.
But this does not mean that their dividends will continue to grow since free cash flow may be reduced because of the construction of "Taneco 2." "

Roman Parshin, managing partner of DTI Digital:

"Extra-high dividends are one of the indicators of a possible company sale and the desire of the major shareholders to partially withdraw funds before the sale. So it was, for example, before Gazprom bought Sibneft.
As for the situation with Tatneft, it is unlikely that they are now increasing dividends to close any holes. I personally assume that the company does this for the withdrawal of profits from the company before the upcoming sale.
Who can buy now? Surgutneftegaz is not interested, it is quite conservative and never bought anyone. Lukoil has a lot of its own worries, and now they don’t have time to arrange such a big deal.
At the same time, we know the policy of Rosneft — they are constantly buying something new to increase production in Russia. How can you increase production and reserves? By absorbing someone big, because you are big and you need comparable scales. Tatneft fits this description."