The world’s most generous dividends are going a-begging as the best quarterly rally since 2012 in emerging markets leaves Russian stocks behind.
Investors are ignoring an estimated payout of 5.3 percent in the next 12 months as they dump Moscow-listed shares on concern the U.S. won’t ease sanctions on Russia as quickly as previously expected. The dividend yield is the highest among markets with at least $100 billion in capitalization and is even higher than sovereign-bond yields. But Russia still can’t attract inflows.
As the performance gap widens between Russia and the rest of emerging markets, the case for buying Moscow shares is getting stronger. Some investors are turning cautious on the rally from India to South Africa and Mexico, as valuations become expensive and volatility tightens to levels that preceded market declines in the past. If those markets stall, a portfolio with higher dividend yields — such as Russia — may outperform.
“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.”
Source: Bloomberg (20 March 2017)