With dividends of more than BRL 100 billion, Petrobras presents itself as a ‘dairy cow’

With the announcement that it will share R$ 101.4 billion of its 2021 result with shareholders, Petrobras confirms the expectation that it is on the way to becoming a “milk cow”, as the market calls companies that pay dividends.

A survey carried out by Economática with oil companies that released balance sheets until Friday (25) shows that the Brazilian state-owned company was the second company in the sector to pay more dividends in 2021, behind only the American giant Exxon Mobil.

Considering the indicator that measures the yield of a share by the payment of dividends, known as “dividend yield”, Petrobras is also second on the list, behind British BP, guaranteeing shareholders a return of 19.94% on the value of the share. .

The number considers only the amounts paid in 2021. Adding the dividend share announced this Wednesday (23), of R$ 37 billion, the return in dividends of the state-owned shares rises to 33%, according to the bank UBS, considering the average value of shares during the year.

The market expects the trend of high gains to continue, at least until an eventual change of government: in its latest strategic plan, Petrobras announced the forecast of distributing up to US$ 70 billion (R$ 360 billion) in five years.

“We continue with a positive view of the company, as the new level of profitability leads to a dividend yeld of 15% to 25% per year”, wrote, in a report, UBS analysts Luiz Carvalho, Matheus Enfeldt and Tasso Vasconcellos.

For TC Matrix’s chief strategist, Hugo Queiroz, the company’s transition to “dairy cow” status reduces the perception of risk about investing in its shares, which tend to be highly volatile depending on the political scenario.

Thus, he says, Petrobras becomes a good asset for investment portfolios with a profile aimed at remuneration by dividends. “Even if the stock is volatile, it doesn’t mean that the company will change its dividend payment path,” he says.

The shift to a focus on dividends was also made under Roberto Castello Branco, the first president of Petrobras under the Bolsonaro government, who was fired in February 2021 amid dissatisfaction over rising fuel prices.

Egress from Vale and defender of Petrobras privatization, Castello Branco approved a strategic plan focused on investments in more profitable businesses, accelerated sale of assets and reduction of indebtedness, freeing up cash to remunerate shareholders.

During its management, the company approved a new remuneration policy that allows the distribution of resources even in years of loss and that determined the payment of dividends above the floor established by law when the debt reached below US$ 60 billion (R$ 309 billion ).

The strategy reduced indebtedness to below the floor and, with oil prices on the rise, the company has shown strong cash generation, which justified the high dividends announced in recent months.

In Brazil, only Vale currently pays as well as Petrobras. In 2021, according to Economática, the mining company paid BRL 73.3 billion, the highest volume ever recorded among publicly-held Brazilian companies. Petrobras released R$ 72.7 billion, ranking second.

On the other hand, the state-owned company entered the electoral debate prematurely, with criticism of the high dividends in a year of record fuel prices at Brazilian stations putting pressure on inflation, which casts uncertainties about the maintenance of the policy.

In 2021, a year with a record profit of BRL 106.6 billion, Petrobras sold fuel at an average price of BRL 416.40 per barrel, the highest value ever recorded on the balance sheet and 15.6% higher than in 2018 , the year of the truck drivers’ strike, after discounting the inflation for the period.

Leader in polls for voting intentions, former president Lula (PT) has been repeating that, if elected, he will change the current policy on fuel prices, which closely follows variations in international quotations and the exchange rate.

“We are not going to keep the price of gasoline in dollars. It is important that the shareholder receives dividends when Petrobras makes a profit, but I cannot enrich the shareholder and impoverish the housewife, who will buy beans and pay more for gasoline”, said at the beginning of the month.

President Jair Bolsonaro (PL) himself has criticized the state-owned company’s strategy. This Thursday (3), he defended that the company reduce profits to avoid a sudden rise in fuel prices in the face of the geopolitical crisis caused by the war in Ukraine.

“In a moment of crisis like this, I think that this profit, depending on the decision of the directors, the board and the president, could be lowered a little at this moment of crisis so that we don’t suffer too much here” “, declared the president, during their weekly live.

Linked to the oil workers’ unions, Ineep (Instituto de Estudos Estratégicos de Petroleo, Gas e Biocombustíveis) criticizes the strategy of generating “superprofits” through the sale of assets and the practice of international prices.

“The company is clearly communicating that it will privilege the generation and distribution of value in the short term”, says Mahatma Santos, researcher at Ineep and at the UFRJ Development, Work and Environment Center.

In his opinion, this model will have consequences for the future of the company, with consequences of the sale of assets and the reduction of investments on its sustainability. In the last strategic plan, he points out, Petrobras foresees more resources for dividends than for investments.

The risk of a new turnaround is recognized by the analysts who cover the company, but they generally maintain a recommendation to buy the company’s shares, which are now considered cheap compared to its international competitors.

“We recognize that the potential change in the controlling shareholder may limit these levels [de retorno] in the medium and long term, with a shift in the company’s focus towards capital allocation and national development”, say UBS analysts.

For Queiroz, the current low price of the share is worth the risk, even for investors who are more apprehensive about the rise and fall of the stock markets. “It is worth monitoring the investor to see if it is not interesting to have a position in the company. Petrobras is very cheap compared to what it delivers.”