Dividends of PJSC Severstal 2021: size and date of payment + forecast

Good afternoon, dear readers!

PJSC Severstal (formerly OJSC) is the leading steel company in the Russian Federation with the highest operating profitability in the ferrous metallurgy sector, a leader in efficiency throughout the world. Stocks have shown astonishing results in the past year. But there are doubts that the current year will end on the same positive note.

I propose to find out whether it is worth investing in the securities of the metallurgical giant today and what dividends Severstal will pay to its shareholders.

Dividend policy

In 2021, the Board of Directors reviewed the payment of Severstal dividends and adopted an updated Regulation on Dividend Policy. The previous edition was in effect since October 2014, and payments were based on net profit. Currently, free cash flow (operating profit minus capital expenditures) is additionally taken into account. The size of the final payment (percentage of Cash Flow) depends on the ratio of net debt and EBITDA:

• <0.5 – more than 100% of available funds are paid;
• <1 – 100%;
• >1 – 50%.

Payments are made annually; if Severstal is in a good financial position, it pays interim dividends. In the near future they plan to switch to constant quarterly payments.

The investment program in 2021 is planned to be increased to $1.4 billion. In 2019–2021 (active stage), the normalized cash flow indicator will be used to calculate dividends. Investments above the base level of previous years ($800 million) will not be taken into account when calculating Severstal's dividends.

Alexey Mordashov increases dividends, reduces costs and expects benefits from the Russian government

Next week, on May 21, the annual general meeting of shareholders of Severstal PJSC, whose underlying asset is the Cherepovets Metallurgical Plant, will take place. Unlike previous years, it was now decided to hold the meeting in absentia. But that’s not the point of the intrigue. 77% of the company's shares belong to billionaire Alexei Mordashov. And therefore, until the last moment, it was difficult to imagine a reason that could disrupt the adoption of decisions already recommended by the board of directors loyal to the oligarch. However, the other day such a reason appeared. The only question is how the richest Russian, according to Forbes, will evaluate her.

Among other things, at the meeting of Severstal shareholders, a decision will be made on the amount of dividends based on the results of the first quarter of 2021, in which we observed a rapid increase in the company’s value against the backdrop of a jump in metal prices. In mid-April, the board of directors recommended paying quarterly dividends at the rate of 46.77 rubles per share (1.7 times more than in the first quarter of last year). In just three months of 2021, the company can pay shareholders about 39.18 billion rubles. However, at the end of last month, an event occurred that essentially brought down its stock quotes.

On April 27, the Federal Antimonopoly Service opened three cases on grounds of monopolistic price increases in the hot-rolled flat steel market. According to the department, Severstal, PJSC MMK and PJSC NLMK (together providing 56% of Russian steel production) could have colluded, as a result of which prices for rolled steel grew faster than the cost of raw materials necessary for its production. At the beginning of the year, flat steel prices rose by more than 50%, while demand for it in Russia did not increase significantly.

If antimonopoly officers confirm violations based on the results of the inspection, metallurgists may be subject to turnover fines. True, according to Promsvyazbank analysts, in the event of maximum sanctions, the capital of Alexey Mordashov

“lose weight” by only 1%. The prospect of an FAS order to reduce product prices looks much more serious for her. It is possible that the steel giant will then have to revise its forecasts for 2021. But will this affect the shareholder payout that the richest person in the country receives?

In terms of dividends, Severstal is one of the most generous companies in Russia; it allocates 100% of free cash flow to them (i.e., all profits after deducting expenses). The steel giant, which is controlled by Alexei Mordashov through a number of Cypriot offshore companies, has not deviated from this principle even during the pandemic. Moreover, last year the company reduced capital expenditures from the planned $1.7 billion to $1.45 billion. According to forecasts, in 2021 this figure will remain at the same level.

Not by amendment, but by agreement

Some Severstal projects have been suspended without exact dates for their resumption. talked about one of them

in No. 11 of March 22, 2021. Let us remind you that the company has frozen the construction of a plant for the production of oil pipes in Surgut. The investor’s decision came as a surprise to the local authorities, who had already prepared the site for the new production and installed communications to it. It is clear that demand for pipes fell last year due to lower oil prices and the pandemic. However, now, against the background of economic recovery, we have not yet heard anything about the continuation of the Surgut project, as if the company is hinting at the need for its support from the state.

On this topic

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And how can one not remember that Alexey Mordashov is not only the richest Russian oligarch, but also, perhaps, the most influential lobbyist in the metallurgical industry.

Last year, when the government decided to increase the mineral extraction tax for ores and fertilizers by 3.5 times, the Russian Union of Industrialists and Entrepreneurs asked the authorities to provide for a number of exceptions. The key idea of ​​the RUIE was voiced by the proposal to exempt projects with production growth of more than 10% from the low level of 2021 from increasing the mineral extraction tax.

Simply put, metallurgists wanted to introduce a variable into this equation that would, in essence, nullify the government's initiative. And it looks like they will be able to do this - if not in the form of amendments to tax legislation, then in the form of individual agreements with the government.

When the law on increasing the mineral extraction tax was adopted, Severstal CEO Alexander Shevelev

almost immediately announced that the steel giant intends to ask for government support for its projects. In an interview with RBC, he explained that we are talking about the mechanism of agreements on the protection and promotion of capital investments (SPPK), under which the state undertakes to compensate investors for losses from changes in working conditions. During 2021, Mordashov’s company plans to include almost all of its mining assets in the SZPK: Yakovlevsky GOK (Belgorod region), Olenegorsky GOK (Murmansk region), as well as the Vorkutaugol and Karelsky Okatysh enterprises. It is likely that the government will have to accommodate business halfway - after all, we are talking about city-forming enterprises, problems at which can lead to a social explosion in individual regions.

Cheap and cheerful

With all this, it cannot be said that Severstal does not care about the regions in which its enterprises operate. For example, in 2021, the company of the richest person in Russia contributed as much as 4 million rubles to the healthcare system of the Belgorod region. In total, at the height of the nationwide pandemic, she purchased personal protective equipment for doctors in the amount of 130 million rubles.

And last spring, Mordashov’s charitable foundation “Road to Home”, together with the Lenta hypermarket chain owned by the businessman, decided to help the residents of Cherepovets who were left without work and money. The billionaire’s structures decided to distribute certificates for the purchase of food worth 3 thousand rubles to those in need. However, already on the second day of this campaign, the acceptance of applications for assistance was stopped - there were many people willing, but there was little money, only 18 million rubles. Residents of the Vologda region then sadly joked that the oligarch probably had to save money on the finishing of his new yacht, which was just preparing to leave the slipway at a German shipyard. According to media reports, the 142-meter Nord yacht could cost its customer $300–500 million. For comparison: the budget of the “Road to Home” fund for 2021 is 86.4 million rubles – a little more than one million dollars.

Let us note that all this is happening against the backdrop of problems with the growth of the domestic economy and attempts by the state to build new relations with business. “The government’s task is to create conditions under which it would be more effective to use existing resources and those resources that may appear in connection with the situation on the world market, to direct these funds not to pay dividends or to distribute them somewhere else - legally, I understand, but somewhere out there, in quiet havens - quiet today, tomorrow what will happen, we don’t know, keeping in mind these factors of uncertainty - but direct them to the development of our own businesses or new businesses within the Russian Federation"

“, the president said in early March at a meeting with representatives of business circles. If in the near future we see the richest man in the country get off with a minimal fine for possible violations of antitrust laws and pay himself another record dividend, these attempts can be considered a failure.

Specifically

In 1988, Alexey Mordashov graduated from the Leningrad Engineering and Economic Institute named after. Palmiro Tolyatti, where one of his teachers was Anatoly Chubais

.
Worked at the Cherepovets Metallurgical Plant. In 1992, during the initial period of privatization in Russia, Mordashov became responsible for the finances of the enterprise. The then general director of the plant, Yuri Lipukhin,
gave his young deputy carte blanche to operate with shares of the recently created Severstal. Alexey Mordashov concentrated profits from the sale of metal products in the accounts of an affiliate, which allowed him to buy shares from workers. After some time, 16% of the plant’s capital turned out to be his personal property, and another 80% of the shares were under his control. As the Kommersant newspaper reported, in 1997 Mordashov bought out the shares of the plant that belonged to Severstal-Invest and removed the former director from business.

All company dividends for the last 10 years

Severstal is one of the leaders in the domestic stock market in terms of dividend yield (listing on the Moscow Exchange since 2005, only ordinary shares in circulation, ticker CHMF), payments are stable. The dividend strike was 8 years.

Terms of purchase and payments

On the day the share register is closed, the lists of shareholders are finalized for the calculation of dividends. The purchase of shares can be made no later than 2 days before this date. Dividend payments are made within 25 days after the closure of the register.

Often, during a dividend gap, there is a significant decrease in quotes, and this makes it possible to purchase shares at a low price. It is important to determine the day the quote reaches its peak. The history of Severstal gaps over the past years allows you to analyze quotes after dividend payments. It must be remembered that the duration of the fall depends on many micro- and macroeconomic factors (crisis phenomena, sanctions pressure, world prices for basic products and raw materials, various global events).

What dividends will be paid in 2021?

In 2021, Severstal breaks its records. On May 7, 2021, a decision was made to pay dividends for the 4th quarter of 2021 in the amount of 32.08 rubles. per share (3.04%), and on June 18 – already 35.43 rubles. (3.32%).

According to forecasts, the next closure of the register is scheduled for September 25 (for the 2nd quarter of 2019, 28.12 rubles, yield 2.63%) and December 4 (for the 3rd quarter of 2021, 28.57 rubles, 2.63 %). At the end of the year, 124.2 rubles will be paid per share, the total yield will be 11.67%.

If we consider payments only for 2021, then per share there were 160.73 rubles, a yield of 15.2%.

The right to receive Severstal dividends are available to holders who purchased securities 2 days before the closure of the register (trading takes place in the T+2 mode).

About company

Severstal is one of the largest steel and mining companies in the country. The company's shares are distributed as follows: 77.03% belong to the owner, 2.82% are Treasury shares, 20.15% are freely traded shares through the stock exchange. Dividends are calculated on shares based on free cash flow. The total amount of dividend payments is determined at the general meeting of shareholders. The company's current yield reaches 10.64%. Operating income for 2021 was $2.7 billion. The share of dividends from profits is 72.87%.

Stock return

The share price has shown stable growth since May 2021. Severstal's dividends are constantly increasing. Payments are made quarterly, and the quarterly dividend yield does not fall below 2%. The annual yield in 2021 was 10.2%, in 2021 – 12.5%, in 2021 – 15.2%. Over the past 1.5 years, its own records have been repeatedly broken (at least 32 rubles per share, maximum 45.94 rubles).

Forecasts for 2021 are more modest (RUB 28–31 per share), but this is a temporary phenomenon associated with an active investment policy. Severstal's securities are not among the top most profitable, but the interests of shareholders are respected. In September 2021, they plan to allocate 64% of net profit to payments, in December - 77%, in May 2021 - 87%.

Some more numbers:

• average quarterly return over the last 3 years – 3.15%;
• the average annual return over the last 3 years is 12.63%.

What was the first half of the year like for Severstal?

The steel price level in 2021 in Russia will be negatively affected due to dubious growth prospects in the Chinese economy and a decrease in steel consumption in the world as a whole. In the first months of 2021, steel sales decreased, but already in March the situation radically changed for the better - compared to February 2018, the cost of hot-rolled coil increased by 40%.

February 2021, an accident occurred at the Severnaya mine, which belongs to the company. As a result of eliminating the accident, the Company flooded the mine with water until mid-summer 2018. The question regarding the timing of completion of restoration work at the damaged mine remains open today.

Due to the fact that the situation in the domestic and global sales markets today is established as difficult, Severstal is using all possible strategic moves, focusing on the production efficiency of enterprises, optimizing available investments, and improving the quality of service and the quality of the finished product.

The beginning of 2021 confirmed the success of using our own business model and its advantages over similar companies not only in the Russian but also in the world markets. The company's management was able to successfully take advantage of the strategic location of production assets, achieving efficiency by moving sales from the domestic to the external market. This in turn neutralized and reduced the undesirable impact of the lack of demand for the steel product this year in Russia.

How to buy shares and receive dividends

Individuals cannot directly participate in trading on the Moscow Exchange. You can only act through a broker. A minimum of 1 lot, including 10 shares of Severstal, is available for purchase.

Purchasing securities from private owners or legal entities involves great difficulties, and the price may differ significantly from the market price. PJSC does not apply direct sales plans.

Best brokers

Choosing a broker to purchase Severstal securities before signing an agreement and replenishing your account must be approached seriously. It is advisable to check the availability of a license and admission to trading on the Moscow Exchange, take into account the exchange commission and brokerage percentage. The intermediary withholds income tax independently; there is no need to fill out a declaration.

Reliable Russian brokers

Warning about Forex and BO

It is possible to receive Severstal dividends only by purchasing securities on the real stock market, to which binary options and Forex have no relation. It's more like playing roulette or other gambling games.

There are no real assets on hand, but there is a high risk of losing all your funds in a short time. I advise you to stay away from such dubious ways of making money.

Forecast

Taking into account the company's planned profit, total dividends for the next 12 months should be 94.66 rubles per share, which is 0.5% higher than current payments (https://www.dohod.ru/ik/analytics/dividend/chmf). Their more significant growth is hampered by investment programs designed until 2021.

The nearest predicted closure of the register is December 3, 2019. The planned dividends are 27.47 rubles. Further forecast: closing date 05/17/2020 - 14.57 rubles, for the 1st quarter of 2021 (06/18/2020) - 31 rubles, for the 2nd quarter of 2021 (09/17/2020) - 21.61 rubles.

It should be remembered that the company does not guarantee the payment of dividends on shares, and their calculation and size strictly corresponds to the approved Regulations on Dividend Policy.