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Petrobras: Grab An Insanely High 30%+ Yield If OPEC+ Keeps Faltering

DT Analysis profile picture
DT Analysis


  • After years of deleveraging that left little room for dividends, Petrobras appears to have finally turned a corner.
  • Their free cash flow surged during 2021 thanks to the strong oil price environment and when looking ahead, this should continue with OPEC+ seemingly faltering on their planned production increases.
  • This is significant from an organization that historically cheats on production quotas, thereby calling into question their ability to increase oil supply.
  • This should support oil prices and thus their dividends with even the relatively modest estimation from Goldman Sachs seeing a massive 30%+ dividend yield on current cost.
  • When combined with their now very healthy financial position, it should be no surprise that I believe a bullish rating is appropriate.
Oil Prices Moving Up

sefa ozel/iStock via Getty Images


The oil and gas industry has not been particularly rewarding for many income investors during the past years, especially the shareholders of the Brazilian major, Petrobras (NYSE:PBR), who have been patiently waiting upon their deleveraging campaign that left

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DT Analysis profile picture
I am no longer active, as I am taking a hiatus from finance to pursue business ventures in other sectors.  I hope that my analysis was helpful to investors across the years, thank you.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (22)

12 Feb. 2022
Is selling puts a way to get around the dividend headaches? The premiums are relatively ripe, 3.5-4% for a March $13 strike based on Friday’s close, with a reasonable likelihood of getting the order filled.
Daniel - Thanks for the heads up last week on PBR and PBR-A. Glad that I followed your advice again. Very nice pop in both prices today.
BrianM777 profile picture
@goin2cali Besides the dividend yield being higher on the preferred shares (PBR-A), the share price anomalies, and voting rights for the common shares (PBR) vs the preferred shares (PBR-A), are there any differences for US based investors when it comes from taxes or dividend policy or is the dividend policy that they recieve the same exact dividend amount (as a dollar amount, not a percent) and they both have 20% withholdings for the dividend per new Brazil tax law effective Jan 1, 2022?
BrianM777 profile picture
Any thoughts on PBR-A vs PBR for US-based investors?
Daniel I haven't seen any of your negative write ups lately and was beginning to think you had given it up for a day job. Hard to believe you are writing something positive but of course this is far more risky than MLP's.
GratefulGuy57 profile picture
You could be right. It's just that their fortunes are so tightly linked to government policy and ethics. And in Brasil that means anything can happen, with the anything potentially being really ugly. If you put eggs in this basket, better watch it like a hawk.
Thank you for bringing PBR to my light
I see there are a lot of ifs
Do you see it pulling back to $7
It all depende if bolsonaro will be reelected or that we get Lula deja vu using pbr cash flow directly as a tool for paying social programs bribes and favors instead as brasilian government receiving dividends as major shareholder and pay those things out of the dividend.
Johnny Skyhook profile picture
@pachamama With respect, because I understand the reasons why you have this view, it should also be pointed out that $PBR hit $77 during Lula's government, compared with $11 today.
@pachamama do you see this stock going down?
When is the election
7422981 profile picture
@Johnny Skyhook That was a different time. Oil producers, especially emerging market based ones, haven't earned those kind of valuations in the last decade or even post 2009. Oil and Gas production just isn't as highly regarded in investment circles(generational progression), although it could come back if the current pricing sticks around long enough.
Darp Research profile picture
@Daniel Thurecht Good article. It is pretty amazing how they have paid down debt even before oil went up. I bot initially March 2021 in the $7s, looked like great setup then, washed out over reaction.

Used both stock and option diagonals. The options were even higher yield than the divs. But now shifting more to just the stock, as takes less time, no rolls. Bot more today premkt. The future divs from PBR in an IRA especially a Roth is a great investment IMHO.

Your article and another helped prompt me to go a little bigger.

@Darp Research do you seeit going down again?
Darp Research profile picture
@stackre Not expecting it or would not have bot today.
@Darp Research how does the 15 percent withholding effect the dividend payment
henry2109 profile picture
Unfortunately, there seem to be a withholding tax of 15 % on the dividend payments, introduced as per January 1, 2022.
Johnny Skyhook profile picture
@henry2109 There is no withholding on dividends. The tax was technically on "interest on equity" which seems a bit like a conjuring trick to fund the government. However, in 2021 only one payment was categorized as interest on equity, and the rest were as dividends (hence no 15% withholding). What happens in the future for these payments is not clear to me, but I will post if I learn anything.
aktien-boersen profile picture

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