Russia's Surgutneftegas is an interesting investment that pays dividends

Surgutneftegas is a large Russian oil and gas company created by merging several previously state-owned companies owning large oil and gas reserves in Western Siberia. The company's headquarters are located in Surgut, Khanty-Mansi Autonomous Okrug. The Government of Russia founded the company in 1977. The number of employees is 92,935. The official website of the company is https://www.surgutneftegas.ru.

This could be an interesting investment for you. Think about the huge cash reserves the company has on its balance sheet - this is the key to success. Many analysts also think that Surgutneftegas is the only Oil & Gas Company in Russia that can benefit from lower oil prices and higher rouble.

Surgutneftegas Public Joint Stock Company (MCX:SNGS) is interesting to observe. A dividend investor would think that owning a strong business and reinvesting the dividends is a good way of growing your wealth.

Investors could also buy a stock because of its yield. They could then lose money if the company's dividend doesn't live up to expectations.

Surgutneftegas's 2.2% dividend yield is certainly not the highest out there. Although, the long-term payment history of this company is impressive and interesting. The recent share price drop will make Surgutneftegas's yield look higher. Although, recent events might have impacted the company's prospects.

Think carefully before buying any stock for its dividend. Take a look at the details of MISX:SNGS Historical Dividend Yield. Surgutneftegas paid out 6.0% of its profit as dividends, over the trailing 12 month period. This is good, because only a little part of the profit was paid out. This means that the dividend is well covered and leaves much opportunity for reinvestments.

Also think about whether the company generated enough cash to pay its dividend. Surgutneftegas's cash payout ratio last year was 15%. This appears to be certainly a nice conservative payout.

It is reassuring to see that Surgutneftegas's dividend is covered by both profits and cash flow. This is usually a sign that the dividend is sustainable. The strong net cash balance of Surgutneftegas should satisfy investors. They should be confident about the short term from a dividend perspective.

Think about what are the chances that a company will struggle financially and cut its dividend. In this case, your income cut and the value of your investment decreases.

The last decade of Surgutneftegas's dividend payments is interesting. Its dividend payments have decreased at least once over the past 10 years. During the past 10-year period, the first annual payment was ₽0.60 in 2010, compared to ₽0.65 last year. This means that dividend payments have grown at less than 1% a year over this period.

It's nice see the dividend growth. However, keep in mind that the dividend has been cut at least once.

Also evaluate the growth of earnings per share (EPS). You would not want a dividend getting cut. Think about what are the chances of getting larger dividends in future. Earnings have grown at around 8.2% a year for the past 5 years. The low payout ratio and impressive strong historical earnings growth suggests Surgutneftegas has been successfully reinvesting in its business. The dividend prospects are probably good with this company. Many analysts are optimistic about continued growth of yearly earnings.

The history of Surgutneftegas is interesting. The company was created in 1993 as a joint stock company. In 1995, the company won a tender for huge oil fields in the Khanty-Mansi Autonomous Okrug. The company also gained permission to build an export terminal in the Batareynaya Bay of the Gulf of Finland and a pipeline between it and the Kirishi refinery.

Surgutneftegas is the leading oil supplier to Belarus, accounting in 2006 for some 30% of the total deliveries. The company also successfully developed its foreign contacts, including talks with Iran, Libya and pre-war Iraq on taking part in oil extraction projects.

Amazingly, Surgutneftegas employs more than 82,000 people and made $24 billion sales in 2007.

At this time in USA, oil prices hold ground at the lowest finish since 2002. USA prices ended flat to hold ground at their lowest in over 18 years. The significant shutdown of major economies in the effort to contain the Coronavirus COVID-19 Pandemic has led to slowdown in demand for oil and expectations for further growth in surplus supplies.

Now, it is still uncertain how long demand will remain low. Analysts are wondering what an eventual recovery could look like.

Leaders in Europe and the USA are making efforts to begin reopening economies. Smart guidelines are needed for regions to follow on reopening their economies. For example, Germany will allow small shops to reopen beginning Monday.

Troubling news are: rising unemployment, rising (crude) inventories, travel/transport restrictions and falling GDP. These events could possibly continue to affect oil.

At this time, World leaders are anxious to reopen factories, schools and shops and to repair the economic damage from the Coronavirus Covid-19 Pandemic that has claimed more than 159,000 lives of more than 2 million people infected.