Rosneft Maintains Dividend Discipline Amid Macroeconomic Headwinds

Russia’s state-controlled oil giant Rosneft has recommended a final 2024 dividend of 14.68 roubles per share, completing its payout for the year at a total of 51.15 roubles per share (combining the interim dividend of 36.47 roubles). This decision underscores the company’s adherence to its dividend policy of distributing at least 50% of net income under International Financial Reporting Standards (IFRS). Despite macroeconomic challenges, including rising taxes and geopolitical instability, Rosneft has prioritized shareholder returns, maintaining its status as a reliable income generator for investors.

Dividend Policy in Action

The final dividend recommendation, announced by the board on April 25, 2025, aligns with Rosneft’s 2024 net profit of 1.084 trillion roubles, which translates to a 50% payout of 542 billion roubles. The interim dividend of 36.47 roubles/share, approved in December 2024, already covered half of the first-half (H1) profit. The final 14.68 roubles/share brings the total payout to exactly 50% of the full-year net income. This consistency reflects Rosneft’s long-standing commitment to shareholders: dividends have been paid every year since 1999, with the per-share amount unchanged since 2011 to ensure predictability.

Contextualizing the Decision

Rosneft’s 2024 results were marked by mixed headwinds and resilience. While net profit fell 14.4% from 2023—primarily due to non-cash tax adjustments linked to Russia’s corporate tax hike to 25%—the company maintained robust operational metrics. Free cash flow reached 1.295 trillion roubles, up from 1.15 trillion in 2023, and EBITDA hit 3.029 trillion roubles, demonstrating its ability to generate cash amid sanctions and OPEC+ production cuts.

The dividend decision also balances future investment needs. Capital expenditures rose 11.2% to 1.442 trillion roubles, reflecting expansions in Arctic exploration and refining capacity. Rosneft’s CEO, Igor Sechin, emphasized that the dividend policy ensures “fair returns to shareholders without compromising the company’s financial strength.”

Risks and Considerations

Investors must weigh Rosneft’s dividend allure against inherent risks. The company’s heavy reliance on the Russian state exposes it to geopolitical volatility, including sanctions and shifts in energy policy. Additionally, Russia’s tax regime remains a wildcard: the 2025 corporate tax hike to 25% could further squeeze profits, potentially pressuring future dividends.

Geopolitical risks also cloud the outlook. Rosneft’s operations in the Arctic and Siberia are critical to Russia’s energy dominance, but Western sanctions have limited its access to advanced drilling technology. Meanwhile, global oil demand remains uncertain, with renewables and energy efficiency trends posing long-term challenges.

Valuation and Investment Implications

As of June 2024, Rosneft’s stock traded at 555.30 roubles, down 1.3% from the prior session but up 16% over the past year. The 2024 dividend yield, based on the total payout of 51.15 roubles, stands at approximately 9.2%—a compelling figure for income-focused investors. However, this yield must be contextualized against broader risks.

Conclusion: A Dividend Play with Caveats

Rosneft’s final 2024 dividend recommendation reinforces its reputation as a disciplined dividend payer, even in turbulent times. With a yield of nearly 9.2% and a track record of payouts since 1999, it offers income-seeking investors an attractive entry point. However, this comes with significant risks tied to geopolitical instability and energy market dynamics.

Investors should consider the following:
1. Dividend sustainability: Rosneft’s free cash flow coverage of dividends remains strong (2024 free cash flow of 1.295 trillion roubles vs. 542 billion in dividends), suggesting financial flexibility.
2. Macroeconomic pressures: Rising taxes and sanctions could squeeze future profits, testing the 50% payout rule.
3. Stock valuation: While the dividend yield is high, the stock’s price trajectory (down 5.85% over four weeks in June 2024) reflects broader market skepticism about Russia’s energy sector.

For investors willing to accept these risks, Rosneft remains a unique play on Russian energy dominance. Yet, its appeal hinges on geopolitical stability—a variable that may outweigh its financial merits for many.