Petrobras skimps on dividend, market value plummets by $14 billion
Brazil’s state-run oil company, Petrobras, saw its shares crash on Friday after it skimped on its dividend, with the ramifications spilling beyond Petrobras and into the wider Brazilian stock market.
Petrobras’ market value tumbled on Friday by $14 billion after the company’s fourth-quarter results—published on Thursday—disappointed investors with a reduced dividend. Investors and analysts had expected an extraordinary dividend between $3 and $4 billion for the quarter, on top of the $2.9 billion regular dividend. But Chief Executive Jean Paul Prates sent shares in the company tumbling when it announced that the year-end payout to shareholders—the Brazilian government included—would only be for the routine dividend of $2.9 billion.
The reduction in shareholder payout sends a clear message to investors. According to JPMorgan, “Investors should expect only minimum dividends for Petrobras,” pointing out that the routine dividend only represented a dividend yield of 8.1% for 2024—a figure that was “substantially below that of peers that typically deliver returns in the low teens,” JPMorgan wrote, according to Reuters.
Other analysts jumped on the criticism wagon and downgraded Petrobras, including BofA, who said that the decision to scale back the dividends “heightens the risk perception at Petrobras, particularly on the government influence regarding major capital allocation decisions.”
Preferred shares in Petrobras fell 10% on Friday morning, resulting in the benchmark Voespa stock index falling 1.4% as investors weighed the message sent to the market as an affirmation that the state-run oil major could shift focus to renewables and that the company might be pursuing a strategy of mergers and acquisitions.
In February, Petrobras CEO Prates told Bloomberg that his plans were to have 50% of the company’s revenues come from wind, solar, and renewable fuels within ten years, adding that he believed shareholders would understand.
