The scenario of greater relief for investors came to fruition after the Petrobras Shareholders’ Meeting (PETR4) with the approval of the payment of 50% of extra dividends (around R$22 billion, or US$4.4 billion), after much turbulence in early March with the Council’s previous proposal to withhold the payment of earnings in full.
The news that the controlling shareholder would backtrack (even partially) was already expected, since the federal government had been showing signs that it was willing to reverse its decision to withhold the resources. Furthermore, the federal government’s vote at the general meeting last Thursday (25) also signaled that Petrobras’ management could decide by the end of the year (December 31, 2024) to pay another 50% remaining of the dividend reserve, which signals that more may be to come.
Based on this, Bradesco BBI carried out some analyzes on whether Petrobras would have enough cash to pay the remaining 50% of the supplementary dividends.
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If there are no mergers and acquisitions this year, the bank sees Petrobras ending the year with around US$14 billion in cash, which would allow it to pay off around US$4 billion in debt due this year and still remain comfortably above the optimal cash level of US$8 billion established by management. However, with an M&A assumption of around $3 billion, the equation becomes a little more challenging and will ultimately depend on Brent levels and the outlook for prices.
The bank also carried out an analysis of what the dividend yield for 2025 would be compared to its peers with and without the increase in the extra dividend.
“While the decision on whether or not to make the incremental payment will be made this year, we expect the payment to take place only in 2025. As a result, we see the dividend yield for 2025 varying from 12% to 16%, which is quite attractive”, evaluate BBI analysts.
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The bank has not yet incorporated the payment of the additional 50%, although it sees a reasonable chance that the state-owned company could pay perhaps 20% to 30% of the retained reserve. In any case, it still considers Petrobras’ investment thesis attractive and maintains its recommendation outperform (performance above the market average, equivalent to purchase) for the shares.
Morgan Stanley highlighted that the approval of a 50% extraordinary dividend was widely expected and, looking at the dividend outlook for the next twelve months, calculates a total yield of 15.2%, which could be attractive to investors looking for returns in the short term.
However, Morgan remains cautious with the action and still sees noise about government intervention still high to justify a fundamentalist and long-term positioning, thus maintaining the recommendation equalweight (exposure in line with the average, equivalent to neutral) for the company’s shares. Even so, the bank raised the target price per ADR (share receipt traded on the New York Stock Exchange) PBR (equivalent to PETR3) from US$ 18 to US$ 19.
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“The changes under the current management team have been balanced and mostly pro-market, in our opinion, which has eliminated important tail risks in the investment case and paved the way for a robust total return outlook. The level of noise about intervention, however, has increased recently with the attempt by representatives of the government’s Board of Directors to withhold 100% of extraordinary dividend payments, which keeps us on the sidelines of the thesis”, reinforce the analysts.
For JPMorgan, the outcome of the meeting was positive and also highlighted that more is to come. “For 2024, we estimate US$11.3 billion in minimum dividends, which in itself would total a 10.3% dividend yield (of which half must be paid in 2024). If the Board of Directors positively evaluates the distribution of the remaining reserve as interim dividends during the current fiscal year, there could be an additional yield of 4.0% for Petrobras shares”, assesses the bank. However, the bank also has a neutral recommendation for the state-owned company.
The bank also highlights that the agenda of the General Assembly also included the election of the Council. Not many changes were made to this matter. The Union elected a slate with six nominees; the current president of the collegiate, Pietro Mendes, was also reappointed to the role. Just like Mendes, the president of the state-owned company, Jean Paul Prates, and already board members Bruno Moretti, Vitor Saback and Renato Gallupo were re-elected to the board, all with the same number of votes, 5.16 billion. Rafael Dubeux, deputy executive secretary of the Ministry of Finance, a department that supported him within the government, was elected to the collegiate for the first time. “During yesterday’s trading session, the market already accepted such decisions and we believe that the potential for intermediate dividends should remain on the radar”, he assesses.
