Bloomberg News

Pimco Favors Russian Stocks on Dividends as Low Fed Rates Lure

February 03, 2012

Feb. 3 (Bloomberg) -- Pacific Investment Management Co., the money manager best known for bond funds, recommends buying Russian stocks with “formidable” dividend yields such as oil producers TNK-BP and OAO Bashneft.

“In Russia we tend to like companies that return cash flows along the way,” Masha Gordon, who oversees about $1.2 billion in emerging-market equities at Newport Beach, California-based Pimco, said in an interview in Moscow.

The manager of the world’s largest bond fund is “overweight” Russian shares, which account for about 13 percent of Pimco’s emerging-market stock holdings, Gordon said. Another 15 percent are developed-nation stocks with “EM DNA,” such as Carlsberg AS, the parent company of St. Petersburg-based Baltika Breweries, Russia’s largest beer producer, Gordon said.

Investors focused on cash income are looking to high- yielding dividend stocks after the U.S. Federal Reserve last week pledged to keep interest rates close to zero until at least 2014. Policy makers are trying to shelter the economy from a possible downturn in Europe. Russia’s central bank reduced the benchmark refinancing rate by a quarter point to 8 percent in December as inflation fell to a two-decade low. Bank Rossii held that rate today.

‘Very, Very Attractive’

“When the Fed tells you rates will remain close to zero for an extended period of time, when you have yields in excess of 10 percent, this is very, very attractive.“

TNK-BP, BP Plc’s Russian oil venture, has a dividend yield of about 8.9 percent while Bashneft, controlled by AFK Sistema, billionaire Vladimir Evtushenkov’s holding company, has a yield of about 9.1 percent, based on data compiled by Bloomberg.

“We tend not to like companies that invest with pretty uncertain prospects,” Gordon said. While cheap by most measures, OAO Gazprom, Russia’s largest company by market value, is a problematic investment because of uncertainties over gas prices and contract renegotiations in Europe, she said.

“It clearly has a very significant capital expenditure program,” Gordon said. “I’m not a believer in a sustainable, high-dividend payout at that company.”

--With assistance from Stephen Bierman in Moscow. Editor: Brad Cook, Alex Nicholson

To contact the reporter on this story: Scott Rose in Moscow at

To contact the editor responsible for this story: Balazs Penz at

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