Russian Dividend Stocks: Not For Widows and Orphans

In case you had any concerns about the safety of Russian stocks, you can now set those fears aside. By Kremlin decree, Russian stocks will now start paying higher dividends. As the Financial Times reported this week, “One of the reasons why Russian companies trade at a discount to their global peers is their historically low levels of dividend payments. In a bid to raise market valuations ahead of a series of privatizations, the Kremlin has been calling on state companies to share a larger proportion of their profits with investors.”

In the case of Russian stocks, the payment of a dividend does not mitigate the risks posed by the absence of the rule of law in the country. Given the risks, investors should only trade Russian stocks with a mind towards short-term price appreciation. Investors looking for both high current income and emerging market growth should look instead to what I like to call “emerging markets lite.” Look for established American and European firms with large and growing businesses in the emerging world.

Source: Trefis

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