Pictet Finds Russian Dividends Appealing

Pictet Asset Management SA, a management company of high-dividend equities has boosted Russian stock holdings under the speculation that different companies will increase payouts for increasing the appeal to various foreign investors. Stephen Burrows, who works as the Senior Investment Manager of Pictet Asset, stated that if the Russian companies are eager to show higher corporate Governance, they can increase the dividend payout ratio. He added that for the last few years, Asia had the higher payout ratio in comparison with other parts of the world, but, the scenario is changing now. Incidentally, Pictet Asset is a unit of the largest privately owned bank of Switzerland.

Pictet Asset has already started to shift out of the Asian equities and into the Russian stocks such as OAO Surgutneftegas, the oil producing company. The benchmark 50-stock Micex Index’s yield was 3.8% on 4th March, the highest level in last 4 years. On the other hand, the MSCI Emerging Market Asia Index yields 2.3%; lower than the 6-month high figure of 2.8% experienced in last June.

Currently, the Russian stocks are trading at 5.6 times of the estimated earnings and this is the cheapest of the most prominent emerging markets. The valuation is around half of what it is for the Brazilian equities. Incidentally, Russia was ranked as the most corrupt country among the G-20 nations in the 2012 corruption perceptions index of Transparency International. Russian policy makers have recently approved regulations that require state companies to pay at least 25% of their net income as dividends. The policy makers are trying their best to lure some extra foreign capital.

The Russian Government hired Goldman Sachs Group in February in an attempt to make Moscow an international finance center and create a positive image for the country in front of the global investors.

The largest dedicated exchange traded fund of Russia, the Market Vectors Russia ETF, has increased by 1.3% on today and is at $28.84 now. This marks its steepest advance since 13th February. On the other hand, the RTS Volatility Index declined by 5.4% and is currently at 20.32. Incidentally, the RTS Volatility Index measures the expected swings in the stock futures.

The biggest company in Russia by market value, OAO Gazprom, has a 12-month gross dividend yield of 6.6%. The same is 3.6% for the biggest oil and gas producer of China, PetroChina Co.