COM - Petrobras: We Shouldn't Be Unnerved By The Overblown Dividend Crisis

2024-04-22 08:30:00 ET

Summary

• Petrobras investors faced significant uncertainty over the extraordinary dividend payouts.
• However, recent reports suggest the board has endorsed a 50% payout, potentially calming investor fears.
• PBR buying momentum has remained robust and has improved since it bottomed out in March.
• The threat of further government intervention will likely dampen a sharp valuation re-rating.
• However, PBR's highly attractive valuation suggests the market has likely baked in these headwinds. Don't be unduly concerned.

Petróleo Brasileiro S.A. ( PBR ) investors endured a torrid two months as they dealt with the uncertainties emanating from Petrobras's extraordinary dividend payout. As a reminder, the government seems displeased with paying these dividends to shareholders. Still, the irony is that the Brazilian government also needs the payout to support its fiscal budget. Moreover, the government is limited in its capacity to convert the extraordinary dividends into reinvestment in energy projects to bolster the economy. Brazil Finance Minister Fernando Haddad reminded stakeholders that "extraordinary dividends, as per Petrobras bylaws, cannot be reinvested and should be paid out."...

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