Dividends are the portion of net profit which is paid out to shareholders. They are paid from net income that remains after the tax and capital expenditures. Investors receive pro-rata dividends on his shares. The amount to be recommended as well as the procedure for payment are decided in the direction of the Board of Directors in line with the results and the plan of the business in this regard.
The final dividend decision is made at the shareholders’ general meeting. The amount of the dividend, as well as the procedure, followed and the date when the shareholders who will benefit from the dividend is set are all mandatory. The approved amount can’t be greater than that previously suggested from the Board of Directors.
The guidelines to determine what dividends are payable is defined in the company’s dividend policy. The policy is posted on the website of the company. It is a guideline for shareholders, allowing the future payouts can be anticipated. It specifies what proportion of net profits will be used to pay for the payments. It provides the conditions that govern how the amount of money can be adjusted.
What stocks yield dividends each month?
There aren’t any stocks on the Russian market which pay dividends at least once each month. This is a condition in the Federal Law on Joint Stock Companies that is governed through Article 42. The law states that Russian issuers are entitled to declare payments based upon performance of their first-quarter or six months or nine months , of the reporting year and/or the performance from the year in which they are referenced. This means that shareholders who invest in companies that are registered within Russia Russian Federation can expect to receive dividends not more than four times in a calendar year.
In actual practice there are a few exceptions. Russian companies pay dividends as often. Some companies have only one payment per year like Gazprom and Sberbank.
How do you define dividends?
- In the event that the payouts for dividends are annually paid then they are considered to be an annual.
- Dividends that are paid out at least once every quarter or half are deemed to be intermediate.
- Special dividends are dividends that are not part of the normal dividend cycle. The decision to pay these dividends is made when the company has surplus money in its balance sheet and it doesn’t know what to do with these funds. Then , it pays its shareholders and gives them cash. The extra cash could be derived from the record profits on net or the sale of assets that are large.
The existence of dividends is typically the primary element for an Russian investor when deciding on a security. However, these dividends aren’t guaranteeable. At the shareholder’s gathering, the decision may be taken to stop payments for a specified time. The law doesn’t prohibit it. The portion withheld of profits can be utilized to replenish reserves or to develop business. The reasons for cancelling can be varied. One reason is the company’s current uncertain financial situation.
Thus, from February to March 2022, because of the geopolitical crisis in Ukraine and the enactment of sanctions, and the closing of traditional retail markets for dividends, the dividends of dividends were cancelled through more than one dozen major firms: Raspadskaya, Moscow Exchange, Mother and Child, Enel Russia, Rusagro, LSR, Cherkizovo, X5 Retail group, and more.
Companies that frequently pay dividends
There are several Russian companies in the securities market with a high payment frequency. If you want to receive dividends as often as possible, pay attention to those who have them quarterly:
- Magnitogorsk Steel Plant
Besides the frequency, one of the most important factors is the size of the dividends or the dividend yield. If you form an investment portfolio of shares of dividend companies, you should select such organizations whose dividend yield will exceed inflation and interest on bank deposits. The company must also have a good history of dividends: regular payments which are not interrupted and which increase gradually.
Procter & Gamble, an American consumer company, is a prime example of a true “dividend aristocrat”. They have been paying dividends for over 130 consecutive years and growing in size for over 60 years. Since the Russian securities market is still very young, we do not have such companies. However, there are a few issuers that have continuously transferred payments longer than others:
- Lukoil – 23 years old.
- Gazprom – 20 years.
- NLMK – 19 years old.
- MTS – 19 years old.
To choose stocks with more attractive dividends, you need companies with stable cash flows, high trading margins, and capitalization. These indicators are important during crises, as they can provide stability and support quotes in the event of a downturn.
20 large companies with the highest dividends
As the size of dividends is constantly changing, we have selected companies with a high five-year average return for the rating. Such a calculation will allow us to estimate not only the amount of payment but also its level in the future for several years.
- Severstal – 14.44%
- PhosAgro – 10.03%
- Lukoil – 6.12%
- NLMK – 13.76%
- MMK – 11.52%
- Moscow Stock Exchange – 5.41%
- Polymetal – 4.78%
- FGC SEU – 8.62%
- Norilsk Nickel – 8.51%
- Tatneft – 7.96%
- Gazprom Neft – 7.37%
- Akron – 7.35%
- Magnet – 6.74%
- Gazprom – 6.66%
- Raspadskaya – 6.54%
- VSMPO-AVISMA – 6.25%
- PIK – 4.55%
- Rosneft – 4.29%
- Polyus Gold – 4.03%
Stocks with high dividend yields are not always a good indicator. If management spends too much of its income on dividends, it may not be investing enough in development. To find out the percentage of profit that is sent for payment, look at the Payout Ratio indicator – ideally it should not exceed 70-80%.
Another important indicator is the Beta coefficient. It shows the degree of dependence of a particular security on the overall dynamics of the benchmark index (in Russia this is the index of the Moscow Stock Exchange), which is always equal to 1. Beta is important to consider when building a portfolio in order to keep the level of risk under control.
If Beta is 2, then if the index drops 10%, the stock will drop 20%. Likewise with growth. When it increases by 10%, the value of the security increases by 20%. A high beta value indicates high stock volatility. Such stocks are popular with speculators trying to beat market returns, but dividend investors should choose stocks with a beta no higher than 0.7.
How to receive monthly stock dividends
For this, you must accumulate stocks in an investment portfolio in such a way that each month, one of them earns dividends. It is possible to select the titles you want that pay dividends using the calendar of dividends, which is among the essential tools available to investors. The calendar indicates when a specific company will expect to pay a percentage of its revenue as well as the amount and at what time the register will close.
The register is which all the data about the shareholders that hold shares of the company is kept. If you wish to receive dividends for the specified time frame it is necessary to register in the your account prior to the closing date (deadline). This date is decided by the Board of Directors. It may change from time to time. For large corporations typically, the closure occurs from March through June.
To be on the distribution list for dividend beneficiaries, you must purchase shares at least two days prior to when the register will close. If you’re not able to make it to purchase shares, you’ll receive dividends the following date. When the deadline is reached The company must transfer the funds in a period of 25 days. This deadline is set through Law No. 208-FZ.
Learn how you can use the calendar. Sort companies according to market capitalization , to instantly get rid of the most small ones and then follow the date for closing the register. Note that dates can be changed the next time. It is therefore possible that during the month, you won’t be receiving money however, there could be more than one payment simultaneously.
To properly build a portfolio of dividend stocks, use principles of dividend strategy that will help protect you against the risks:
- Distribute the money between companies in different sectors, i.e. diversify investments.
- Focus on company size – capitalization.
- Try to choose those that pay dividends for many years.
- Check the ratings. Debt to equity is the ratio of the company’s debt to equity, ROE is the return on equity, payout ratio is the percentage of profit given to dividend payouts, beta – level of volatility.
- Consider taxes – on Russian stocks the dividend tax is 13%.
US companies with monthly payments
Unlike Russia, there are organizations in the US stock market that pay monthly dividends. These are mainly companies active in financial services or REIT real estate funds. True, some of these stocks can only be purchased in Russia if you have qualified investor status.
ETFs also pay dividends every month. For example: Fidelity NASDAQ Composite Index Track, Cambria Shareholder Yield ETF and ProShares S&P Technology Dividend Aristocrats ETF. Let’s take a look at some companies below.
STAG Industrial REIT [STAG]
Owns and leases industrial premises. One of STAG’s major tenants is Amazon.
Real estate income [O]
The owner of more than 6,500 properties, which are rented by approximately 600 companies. According to Realty Income, the average lease term is 9 years.
SLD properties [LTC]
Another RIET fund specializes in nursing homes and other medical facilities.
Pennant Park Capital Floating Rate [PFLT]
An investment fund that lends to small and medium enterprises in various sectors.
Prospect Capital Corp. [PSEC]
Enterprise Development Foundation. Invests in the debt and stocks of small US companies in various sectors.