Petrobras: Dividend Oasis May End Up A Mirage

Summary

• The latest massive dividend provided by Petrobras far exceeds anything in their history.
• Whilst shareholders will quite likely fondly remember this for many years, it seems there is far more downside risk than upside potential going forward.
• The already concerning political situation in Brazil is now looking worse for shareholders with their federal election merely weeks away and Luiz Inácio Lula da Silva maintaining his lead.
• If elected, his policies would see higher operating costs, lower revenues due to non-market-based fuel pricing and possibly capital utilized to reacquire formerly divested refineries.
• This would be bad news for their future dividends, possibly leaving them more of a mirage than an oasis, metaphorically speaking and thus I believe that maintaining my sell rating is appropriate.

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Introduction

The oil and gas industry has seldom provided shareholder returns as those recently but even across this landscape, the insanely high 40%+ dividend yield from Petrobras (NYSE:PBR) stands out, although as my previous article discussed, it

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.