Moscow Exchange draws up dividend recommendations for public companies

09-01-2018

Moscow Exchange and the Association of Institutional Investors have prepared recommendations for the development and implementation of dividend policies at public companies.
Compliance with the recommendations may improve the investment attractiveness of companies and ensure transparency when determining the amount of dividends.
The recommendations primarily target issuers included in quotation lists of the first or second level that are primarily subject to the Moscow Exchange Listing Rules requirement to have a dividend policy.
“The availability of a formalized approach to dividends is especially important for the domestic market given the high concentration of ownership in Russia. Most of the Russian public companies have a majority shareholder: according to a survey by Deloitte published in 2016, 73% of the 120 Russian public companies had shareholders with stakes exceeding 50%. Given that majority shareholders and the management do not always have the same interests as the other shareholders (including minority shareholders), a public benchmark for dividend payments declared by the company could, in a way, guarantee minority shareholders a balanced approach to the profit distribution,” the document notes.
Moscow Exchange recommends that companies determine the time scope of their dividend policy (up to 3 years for a short-term policy, 3-5 years for a medium-term policy, more than 5 years for a long-term policy). Investors traditionally holding shares for a long period of time give preference, everything else being equal, to a dividend policy intended to be effective on a medium to long-term horizon.
“In practice, the payment of quarterly and/or semi-annual dividends make the company’s shares more attractive to investors and less volatile as predictability of dividend flows increases,” the experts point out.
 

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