OREANDA-NEWS. May 26, 2010. The Board of Directors of TNK-BP Holding has proposed a RUB2.18 dividend for 4Q09, in addition to an interim dividend of RUB7.41 to be paid for 9M09. The combined annual dividend of RUB9.59/share delivers a gross yield of 15.8% for common shares and an 18.4% yield for preferred stock, one of the highest rates in the oil industry, reported the press-centre of OTKRITIE Financial Corporation.

The record date for TNK-BP Holding’s AGM was 14 May, and the meeting should take place on 30 June. This means that both classes of shares already trade ex-dividend.

View: By proposing the 4Q09 dividend (RUB2.18/share) in addition to the (already generous) payment for 9M09 (RUB7.41/share), TNK-BP Holding has reaffirmed its status as the top dividend payer in the Russian oil and gas secto. In accordance with its dividend policy, TNK-BP Holding pays out essentially all cash after meeting its capex and debt service costs as dividends to its shareholders. The company paid a RUB5.06 dividend for 2008. The increased 2009 dividend proposal reflects, in our view, the improved cash flow generation resulting from higher netbacks.

Valuation and Action: We maintain our BUY rating on TNK-BP Holding with a target price of USD2.52/share. Trading at only 5.0x on a 2010E P/E, the stock remains inexpensive in the context of the oil sector and the Russian market.