Moscow Exchange plans higher dividends, to double retail client base

MOSCOW (Reuters) - The Moscow Exchange MOEX.MM plans to channel all of its free cash flow into dividends and will also raise a dividend payout floor to 60% from 55% of net profit under a new dividend policy announced on Tuesday.

Russia’s main stock exchange has also approved a new strategy for the five-years to 2024, including longer trading hours and an expanded range of products and services.

The five-year plan, designed to ensure at least a 10% annual commission fee growth, will also improve the cyber stability of the exchange’s key systems.

“Our main goal is to maintain the reliability of our systems in line with the best industry standards and satisfy the needs of our customers,” the head of Moscow Exchange Yury Denisov told reporters when presenting the new strategy.

The Moscow Exchange plans to double its retail investor base from the current 3 million people in the next five years, said Denisov, who took over as CEO in May 2019.

The exchange said it would continue paying dividends on an annual basis.

This has disappointed hopes of some analysts’, particularly VTB Capital, for interim dividends. BCS Brokerage also said earlier that an interim dividend payout would have a positive impact on the Moscow Exchange shares.

“The new dividend policy has been designed to balance long-term growth and financial stability with the continued strengthening of the investment case,” Oleg Vyugin, Chairman of Moscow Exchange’s Supervisory Board said in a statement.

MOEX shares rose 1.9% on the day to 91.39 roubles each, their highest since Oct. 7, following the announcement on the new strategy.

The bourse’s free cash flow, seen as a measure of profitability in financial analysis, takes into account investments needed to maintain and expand its business, as well as regulatory requirements applicable to the Moscow Exchange and its subsidiaries.

Retail investors have been attracted to the Moscow Exchange as its key rouble-denominated index MOEX .IMOEX has climbed by about 15% so far this year and the average dividend yield of stocks traded on the exchange is at 7%, above an average deposit rate for banks, the Moscow Exchange said.

The central bank is the largest shareholder of the Moscow Exchange with around an 11.8% stake, followed by the country's largest lender Sberbank SBER.MM with about 10%, according to the Moscow Exchange data.

Reporting by Andrey Ostroukh and Elena Fabrichnaya; Writing by Anna Rzhevkina; Editing by Jane Merriman