Petrobras: Analysts celebrate extra dividend, already expecting the other half

After much noise and turbulence surrounding this issue, analysts and investors are celebrating Petrobras' announcement of extraordinary dividend distribution totaling R$21.9 billion, approximately R$1.76 per share, linked to 50% of the company's capital reserve, but they are already keeping an eye on the other half. The expectation, with the repercussion, is that the remaining amounts could be announced in the second half of this year.

On Friday, preferred shares (BVMF: PETR4) closed up 0.78% at R$41.41. ADRs (NYSE: PBR) gained 2.54% at $17.05.

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Since Petrobras announced dividends in March without disclosing the values of additional earnings, the shares faced fluctuations. However, they've been on an upward trajectory as analysts' perceptions shifted following media reports suggesting government consensus—the largest shareholder of the company—on this matter. The situation also led to heightened tensions between the company's president, Jean Paul Prates, who previously advocated for paying this portion, and the Minister of Mines and Energy, Alexandre Silveira, along with other government members who opposed the payment and worked to withhold it. Nevertheless, Silveira stated that Petrobras' Board needed to prioritize "the Treasury's needs." The federal government is anticipated to receive approximately R$6 billion in extraordinary dividends from Petrobras amidst challenges in balancing public accounts.

Bank of America (NYSE: BAC) (BofA) considered the announcement "a step in the right direction," helping to calm investors' concerns regarding Petrobras' growth agenda, which would lead to higher investments, mergers, and acquisitions, possibly at the expense of higher dividends.

With the distribution, BofA estimates a dividend yield of 16% for Petrobras this year, which would be higher than the peer average of around 8.7%. The bank also considers it important to mention that the news indicates that the government does not rule out paying the remaining amount in the capital remuneration reserve in the second half, that is, another R$22 billion. "A decision on this is expected in the coming months," highlights BofA, which has a neutral recommendation and a price target of $16.80 for ADRs.

According to Itaú BBA, the announcement confirms the green light previously indicated by the Board, which had understood that the payment of 50% of the capital reserves as extraordinary dividends would not compromise the financial sustainability of the state-owned company.

"Furthermore, the possibility for the company to pay the remaining 50% of the capital reserves as extraordinary dividends later this year is a positive option that should increase the appeal of holding the shares," Itaú BBA points out in a report released to clients and the market, recommending a Market Perform for the company's shares, with a price target of R$43 for preferred shares and $16.7 for ADRs.

EQI Investimentos, which considers the state-owned company as "the big star" of its dividend portfolio, believes that "there will be no difficulty for the company to distribute the remaining 50% by the end of the year, given the strong quarterly results expected throughout 2024."

Meanwhile, Genial Investimentos considers the total distribution "technically justified considering the current level of oil prices, low extraction levels, and debt under control."

What InvestingPro Says About Petrobras

Petrobras pays good dividends to shareholders, and the stock has a high return over the last year, according to InvestingPro. The Protips, insights from artificial intelligence (AI) based on fundamental indicators, also indicate that the company has had a strong return over the past five years.

The financial health of Petrobras is considered excellent, with a rating of four out of five, according to a metric that ranges from one to five.

The fair price for preferred shares in Brazil is estimated at R$60.19, with a predicted upside of 45%, according to 14 investment models compiled by InvestingPro. Analysts' target is more pessimistic, at R$42.13.

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