Investors discuss dividend policies of Russian public companies

The Moscow Exchange and the Association of Institutional Investors held a round table with market players, issuers and investors to discuss dividend policies of Russian public companies. The API members East Capital, UCP, Prosperity Capital Management and URALSIB participated in the discussion on the part of investors.
The requirement for issuers included in quotation lists of levels 1 and 2 to have a dividend policy is stated in the Moscow Exchange Listing Rules. In December 2017, the Moscow Exchange released methodological recommendations for drafting and implementing dividend policies by public companies with the aim of increasing their investment appeal and ensuring a transparent procedure for determining the amount of dividends.
All companies included in the first-level and second-level quotation lists currently have dividend policies, but not all of them have made their policies specific and clear-cut. In particular, 20% of the issuers whose shares are included in the top-tier quotation lists have no dividend calculation benchmarks. 36% of the companies included in the first and second-level quotation lists did not pay 2016 dividends; for 2015 dividends, the percentage of non-payers was even higher (46%).
At the same time, the Moscow Exchange’s consistent efforts aimed at improving corporate practices of issuers yield positive results: many issuers start to think of improving their dividend policies and dividend policy implementation practices.
“To increase the investment appeal, many issuers have switched to paying interim dividends: 15 out of the 50 largest Russian companies pay 6-month dividends, 6 issuers pay quarterly dividends. Brokerage companies have also started drawing investors’ attention to dividend-paying companies by publishing related recommendations on dividend-earning shares. Dividend policies are obviously becoming an important factor influencing investment decisions,” Anna Kuznetsova, a member of the Executive Board and Managing Director of the Moscow Exchange Securities Market, noted.
Representatives of the investment community have confirmed Anna Kuznetsova’s opinion. Investors primarily expressed preference for a simple and transparent dividend policy at companies and emphasized that issuers paying higher dividends were increasing capitalization faster. A number of major Russian companies enjoying a low debt burden can now aim at higher dividend payments. The development of capital management culture contributes to achieving a reasonable balance between the investment requirements of companies and the need to ensure attractive dividend payments, the discussion participants said.
In April 2018, the Moscow Exchange published on its website a checklist for compliance with the methodological recommendations for drafting and implementing dividend policies to let issuers make an independent assessment of compliance of their dividend policies to the Moscow Exchange’s recommendations.
The next step towards transparency of the dividend calculation procedure is the requirement for issuers to disclose the dividend policy and the history of dividend payments in the last 5 years on their websites. This requirement is expected to be imposed in 2019.
For details on the recommendations for drafting and implementing dividend policies, visit the Moscow Exchange website.

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