Analysis: Romanian listed companies will pay EUR 1 bln dividends. Which bring the highest yields?
When uncertainty hits the markets, and cash becomes king, companies that pay dividends tend to become more attractive for investors. Companies listed on the Bucharest Stock Exchange have been generous to their shareholders in recent years in terms of dividends, and this year is no exception. Despite the COVID-19 crisis, Romanian listed companies will pay close to EUR 1 bln in dividends from the 2019 profits. Romania-Insider.com has checked the most attractive dividend payers on the Bucharest Stock Exchange.
Oil and gas group OMV Petrom (SNP) is by far the most generous company on the Bucharest Stock Exchange this year. The company will pay dividends worth EUR 363 million to its shareholders, representing almost half of last year’s net profit. The group has increased the payout ratio from 38% of the 2018 net profit to 48% of the 2019 net result, despite the adverse market conditions. The proposed gross dividend per share of RON 0.031 is the highest in the company’s history (similar to the one in 2012). The dividend yield is also among the highest on the Bucharest Stock Exchange, close to 10%.
The shares of OMV Petrom plunged by 40% from the multi-annual high of RON 0.45 per share reached in January until the end of March. However, it has bounced back by about 18% from the March lows. On the downside, the company is likely to see a significant profit drop this year due to the adverse market conditions, including low oil prices and lower fuel consumption amid the COVID-19 crisis. Thus, the dividend next year is also likely to be smaller.
State - owned power producer Nuclearelectrica (SNN) offers the highest dividend yield among the clue-chip companies on the Bucharest Stock Exchange – 10.8% based on the current market price. The company, which operates Romania’s only nuclear power plant – Cernavoda, will distribute over EUR 100 million to its shareholders. Nuclearelectrica has recorded growing profits over the last three years. As a result, the company’s shares have almost tripled their value over the last two years and are currently trading close to their all-time high. Moreover, after a 30% dive in March, amid the COVID-19 selloff, the shares have bounced back, gaining 40% in the last six weeks.
As a state-owned company, Nuclearelectrica is one of the Government’s cash cows and has a stable dividend policy. State companies are now required by law to distribute at least 50% of their profits as dividends, but the Government has asked for a 90% payout ratio from most of its companies in recent years. However, Nuclearelectrica is vulnerable to regulatory decisions related to the price of electricity.
Gas producer Romgaz (SGN) is another state-owned company that has been paying attractive dividends in recent years. This year, Romgaz will pay total dividends of EUR 128.5 mln. However, the gross dividend per share is less than half compared to that paid last year as the company has kept half of the profit made in 2019 for investments. Even so, the dividend yield is about 5.8%. The company’s shares are down 24% this year. Just as Nuclearelectrica, Romgaz is subject to regulatory decisions that can significantly impact its results.
Gas transporter Transgaz (TGN) is yet another so-called state cash cow. The company boasts high and rather constant profitability rates and has been paying dividends each year. This year, the dividends are lower as the company has also kept part of the profit for investments. The dividend yield is thus close to 6%. However, in previous years, the state has asked Transgaz to pay additional dividends towards the end of the year, which could also happen this year, especially as the Government has a huge deficit to finance. In fact, this is valid for all state-owned companies, which the Government could shake off for more cash later this year, thus rounding the investors’ returns.
Other state-controlled companies that offer attractive dividends are electricity holding Electrica (EL), which offers a 7.5% dividend yield, and oil pipe operator Conpet (COTE), with a dividend yield of over 9%.
The power transmission company Transelectrica (TEL), on the other hand, has recorded oscillating results in recent years. However, its shares are down 50% in the last three years, trading close to their lowest level in six years. Thus, Transelectrica could become a good dividend play in the coming years.
Of the private companies on the Bucharest Stock Exchange, Banca Transilvania (TLV) has been among the most generous with investors. The lender, which has a history of over 25 years, has relied mainly on the capital market to grow into the biggest financial group in Romania. For many years, Banca Transilvania hadn’t paid any dividends and had capitalized its profits while also drawing cash from shareholders. However, this has changed in recent years as the bank has recorded record profits allowing it to cover its financing needs and also pay dividends. This year, the dividends amount to EUR 124 mln, and the gross dividend yield is 6%, based on the current market price. This year, the bank expects its profit to be negatively impacted by the COVID-19 crisis, which will also influence next year’s dividends.
Investment fund Fondul Proprietatea (FP) has also been a stable cash source for its investors in recent years. The fund, which still holds significant stakes in state-controlled companies, the most important of which is power producer Hidroelectrica, gets significant dividends from these companies, which it has been distributing to its shareholders. Moreover, the fund has also carried out the biggest share buyback programs on the Bucharest Stock Exchange, which it has financed by selling assets from its portfolio. This year, the fund offers a dividend yield of 5.7%. Moreover, the fund’s shares are trading at a discount of over 20% compared to the net asset value per share (NAV/share), offering the potential for further growth. The fund’s evolution in the next years will be largely impacted by the listing of Hidroelectrica, which now represents close to 50% of its portfolio.
Telecom group Digi Communications (DIGI) also started to pay dividends in 2018, and this year is the third consecutive year when the company distributes cash to its shareholders. The dividend yield is rather low compared to other blue-chips, 2%, but the dividends have been growing each year.
Among the smaller companies on the Bucharest Stock Exchange, drug producers Biofarm (BIO) and Antibiotice (ATB) have had stable dividend policies in recent years. The pharmaceutical sector is less vulnerable to the COVID-19 crisis, and some companies in this sector could even gain from this crisis. This makes the two drug producers a rather safe bet in the current context.
Other companies that deserve some attention from dividends seekers are cardboard producer Vrancart Adjud (VNC), helicopter producer IAR Brasov (IARV), and the Bucharest Stock Exchange (BVB). The dividend paid by BVB this year is rather low, but the market operator could see increased activity and, hence, improved results in the coming years as it is set to be upgraded to emerging market this year.
Find here an overview of the dividends to be paid this year by companies on the Bucharest Stock Exchange and the dividend yields calculated based on the share prices on May 5.
Disclaimer: This article is for information only and not meant as investment advice. Past performance is not indicative of future results.
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