Dividend yields that are more than double those of their developing-country peers have caused a rally in Russian stocks eclipsing almost all equity markets worldwide this year and attracted investments from all over the world, Bloomberg writes.
As worries about potential new U.S. sanctions faded in the past few months, the dollar-denominated RTS Index jumped 35%, busting through its pre-2014 sanctions level. Russian financial stability, currency strength and cheap valuations have also won over investors, with only Greek stocks beating the Moscow benchmark in 2019.
“The dividends have been a game changer,” said Swedbank Robur portfolio manager Elena Loven, who sees the rally continuing into next year. Russian stocks “can easily go up another 40%-50% and still be cheap,” she said.
Russia’s state-controlled companies have been under pressure to hand back more profits to the Finance Ministry as dividends in recent years, and stock investors are benefiting as a side effect. State-run gas giant Gazprom has gained 64% since the start of 2019 after it boosted payouts. It plans to distribute half of its net income in dividends in future.
“The two banks now have the capital, growth potential and profits to allow a more generous distribution of dividends,” said BCS Global Markets analyst Elena Tsareva. “There’s not much growth in the economy or lending, but there are strong dividends and a stable environment.”
Out of 23 Russian members of the MSCI Emerging Markets Index, 15 have delivered total returns surpassing the gauge’s average of 14% this year, according to data compiled by Bloomberg.
Analysts have increased their Russian earnings estimates since the start of the year, while trimming their projections for emerging-market companies in general.
Russia’s stock indexes are loaded with energy companies, a sector that has been staging a recovery in European equity benchmarks. The Stoxx Europe 600 Oil & Gas Index is trading near the highest level since July amid attractive valuations and optimism around U.S.-China trade talks and their positive impact on global growth.