American financier J.D. Rockefeller said watching dividends rolling in was the only thing that gave him pleasure. But it is a pleasure which until now has largely bypassed shareholders in most big Russian companies. That might be about to change.

Russian firms,  especially the big commodity producers, are generally seen as poor dividend payers. So dividend yields, the ratio of dividends to the share price,  have been unattractive.

On a trailing 5-year period, the average dividend yield in Russia was 1.8 percent compared to 2.5 percent for emerging markets, notes Soren Beck-Petersen, investment director for emerging markets at HSBC Global Asset Management. That absence of positive cash flow from companies is one reason why Russia has always traded so cheap relative to other emerging markets, he says.

See the following graphics from my colleague Scott Barber (@scottybarber)

But as the graph above shows, the ratio has been improving. Beck-Petersen says it stands now at 2.1 percent for Russia versus 2.7 for emerging markets. Smaller oil companies Bashneft and Surgut pay double-digit dividend yields on their preferred shares. Steelmakers Evraz and Mechel gladdened shareholders last year with decent dividends.

 

And in December, Russia’s biggest company Gazprom announced it would more than double dividends to pay out almost $7 billion.  That pushes up Gazprom’s dividend yield to a respectable 4.5 percent, triple the 2009 levels. Because the company makes up almost a third of MSCI’s Russia index, the payout will likely raise the Russian average dividend yield above the emerging markets average.