Top shareholders of metals giant Norilsk Nickel are discussing a $1 billion 2009 dividend, a newspaper reported, and analysts said that is easily within the now-profitable miner's means.
Vedomosti cited sources close to the company's two major shareholders, Vladimir Potanin and Oleg Deripaska, as saying Norilsk may use half of its $2 billion profit from last year to pay the dividend.
Norilsk declined comment.
"We expect Norilsk to generate around $4 billion in cash in mid-2010. Thus, a dividend payment of $1 billion is not a problem," Metropol investment house said in a note.
"While the company must repay around $3 billion [of debt] in 2010, we think it will have sufficient cash to make these payments, and could also possibly distribute $1 billion in dividends," UralSib echoed in a separate note.
The fact that dividends are back on the agenda at the world's leading nickel and palladium miner is a further sign that a recovery is underway among Russian miners, who were hard hit by declining demand for base metals when the economy soured at the end of 2008.
The dividends are likely to be discussed by the company's board in March, UralSib said. Historically, the cut-off date for receiving dividends is near the beginning of May.
Norilsk, the world's top nickel and palladium producer, decided to axe its dividend for 2008 after it was hit by the global financial crisis, following a $774.4 million payout for 2007.
In the past, Norilsk, which supplies 20 percent of the world's nickel, has generally paid a quarter of net profit in dividends. Norilsk has said it expects a $2 billion net profit for last year after a loss of $449 million in 2008.
The company's official dividend policy calls for a payout of 20 percent to 25 percent of net profit, Deutsche Bank analysts said.
Analysts were not impressed by the dividend yield, despite the fact that it far exceeds the amount that Norilsk is required to pay shareholders.
"We view the news as moderately positive as on one hand the company has not paid dividends since 2007, but on the other hand the amount of $1 billion implies only 3 percent dividend yield," Ray, Man and Gore said in a note.
"The proposed dividend payout implies around $5.5 per share, or a 3 percent dividend yield, which is insignificant in our view," UralSib agreed.
Potanin's holding group Interros and aluminum producer United Company RusAl, where Deripaska has the biggest stake, each own a quarter of Norilsk shares.
RusAl has pledged its stake in Norilsk as collateral to secure its debt to Russia's state-run Vneshekonombank.
Potanin has also been reported to have pledged as collateral a big chunk of his holding in Norilsk with state-controlled VTB in exchange for a $3 billion loan.