Hermes: Consider Russia for Income But Not Long Term Growth

Russia stock market is up 35% year to date thanks to the recovery of oil price, however investors should consider Russia equities for income but not for long term growth

Karen Kwok 26 October, 2016 | 5:05PM

Russia stocks offer attractive dividends that could be a sustainable source of income for UK investors, according to Gary Greenberg, head of emerging markets for Hermes. However, investors looking for growth should steer clear, as the market offers low profitability and capital could be at risk.

“It is appropriate and sensible for Russia companies to pay high dividends as they do not have particular great capital expenditure projects,” Greenberg told Morningstar this week. “But I do not have an overweight position in Russia because it remains too government controlled, and there is always potential for war in the region.”

Hugo Bain, senior investment manager at Pictet Asset Management said that dividend yields of Russian stocks are extremely attractive relative to the US market. While the Moscow Exchange MICEX index offers a dividend yield of 5.8%, S&P 500 offers just 2%.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Rosneft Oil Co GDR6.17 USD2.02

About Author

Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk

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