US sactions could force Russia’s dividents into a free dive

Since USA put some sanctions which affects Russia’s economy, things are not so good for them. Everyone is expecting that Donald Trump will lift them, but till then, everyone is waiting.
“Vladimir Putin is a thug, a bully and a murderer, and anybody else who describes him as anything else is lying,” Sen. John McCain said during comments in December describing Tillerson’s nomination as a “matter of concern.”
Trump can give him a helping hand in this situation but, for sure, everyone will try to block his actions. But because this procedure is much more difficult than it seems investors are ignoring an estimated payout of 5.3 percent in the next 12 months as they dump Moscow-listed shares.
“In other markets, such a yield costs double in stock valuations,” said Ekaterina Iliouchenko, a money manager at Union Investment in Frankfurt, who oversees about $215 million in eastern European assets. “While the Trump rally is over, unless oil collapses, strong crude and good corporate financial results should bring investors back to the Russian market.”
For many, Russia is now a “cheap” source of investment.
“The high dividend yield is an argument in Russia’s favor. However, the dividend yield alone isn’t enough for the Russian market rally to resume. It needs a different trigger. I think the Russian market can go lower from current levels. Right now, the stock market isn’t so cheap anymore. Many investors are turning negative on oil’s prospects, the optimism that sanctions will be eased quickly has soured. People are taking profits and don’t have high hopes for the market. It doesn’t make sense to buy Russian stocks just for the sake of dividends,” said Elena Loven, who helps manage more than 1 billion euros ($1.1 billion) in Russian stocks at Swedbank Robur in Stockholm.
Another perspective from outside has Sergey Vakhrameev, a money manager at GL Financial in Zurich, which oversees about $100 million in assets: “The Russian stock market has an attractive dividend yield. However, it’s a premium for risk and volatility. It’s a bad idea to count just on the dividends, because if the stock falls 10 percent to 15 percent in one week, a high dividend yield won’t compensate for it.
Mattias Westman, the London-based founder of Prosperity Capital Management, which oversees about $3.4 billion in assets from Russia and former Soviet republics said that “if the sanctions are lifted, the shares will rise and the dividend yield will drop to 4 percent. Despite Russia’s high dividend yield, one can lose a lot and very quickly on the market’s decline.”
“The high dividend yield is very attractive. It shows that Russian companies are highly cash-flow generative and that CAPEX discipline is much better than some years ago.


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