SIFs Propose Highest Dividends So Far

The dividend yield in SIF Transilvania’s case is 24% if looking at Friday’s closing price.

The five regional investment funds, national gas transmission company Transgaz Medias (TGN.RO) and rolling stock maker voestalpine VAE Apcarom Buzau (APC.RO) are the companies offering the highest dividend yields according to the proposed dividends revealed over the last two weeks.

These companies propose to pay dividends of more than 7% of their current share price. In other words, whoever buys a Transgaz share will get a dividend of 9.7% of their investment value, which is almost double the interest rate they would get for a one-year bank deposit.

Large banks pay about 4% to 5% a year in interest for a deposit and smaller ones fighting to get cash may pay even more than 6%. Still, the bank deposits carry a lower risk and investors know exactly how much they will collect upon due date. With stocks, the final yield varies with several factors.

While the dividend profit can be estimated, the investors have no idea at what price they will sell their shares later. Prices are usually adjusted for the dividend value after the dividend date, which means that to get the 9.7% dividend yield in Transgaz’s case, the price of the shares in six months or one year from now should be at least equal to the current price.

High dividend yields have made investors buy in the last few years driving the market up at the beginning of every year. Once the dividend date passes, shares tend to suffer significant adjustments.

Sixteen companies had announced their proposed dividends for 2012 by Friday. The highest dividends (total amount) will come from Fondul Proprietatea (FP.RO), 563 million lei (EUR128 million), Transgaz, RON251 million, and SIF Transilvania, RON191 million.

The dividends of three of the SIFs are not 100% certain, as they proposed several options. SIF Banat-Crisana (SIF1.RO) suggested three options for last year’s profit, one of which entails not paying any dividends. SIF Muntenia suggested two dividend options, while SIF Moldova’s case, a group of shareholders requested a higher dividend than proposed by the management. Investors will have to wait to see what they will actually get until after the general meetings of shareholders.

Some companies made surprising announcements such as hotel businesses Turism Felix (TUFE.RO) and THR Marea Neagra (EFO.RO), controlled by SIF Transilvania, which will pay dividends for the first time in eight years, and Sinteza Oradea (STZ.RO), which had not paid any for ten years.

Pharmaceuticals producer Biofarm Bucuresti (BIO.RO) proposed 30% higher dividends than last year, and brewer Bermas Suceava (BRM.RO) increased the dividend by 8%.

More companies should go public with their proposed dividends this week. Last year 28 companies paid dividends, with OMV Petrom (SNP.RO) leading the pack with RON1.755 billion and expected to announce it will pay at least as much as last year.

Investors will also be watching pharmaceutical producers Zentiva (SCD.RO) and Antibiotice (ATB.RO), as well as Aerostar Bacau (ARS.RO) and Rompetrol Well Services (PTR.RO).

Alro (ALR.RO) and BRD (BRD.RO), which used to disburse hefty dividends in previous years, will not do so in 2013, because they posed losses in 2012. (EUR1= RON4.394)

(English version by Loredana Fratila-Cristescu)

Note: SIF Banat-Crisana proposed three dividend options, with version I being no dividends, SIF Muntenia proposed two. SIF Moldova has two proposed dividends, one by the board of directors, one by the shareholders.

Sources: Bucharest Stock Exchange, ZF calculations