Why not invest in Gazprom?
Choosing the most reliable investment object is the first step in creating a truly risk-free portfolio, which is especially important for beginners. It’s time to listen to the chorus of a funny song by a famous Russian artist: “I don’t want to be an engineer, I don’t want to be a combine operator, I want to be a shareholder of OAO Gazprom.” After all, there is great truth in it!
Buying shares in an oil and gas giant is an ideal option for the vast majority of those just beginning to taste the thin ice of the modern investment market, as the company’s securities have shown strong liquidity for many years. Yes, many analysts believe that if a company is not at the top of the market, it is not worth investing in. But they are silent on the effective strategy that the legendary Warren Buffett invariably adheres to: the policy of investing in undervalued assets.
PJSC Gazprom is a gigantic company that produces and transports natural gas to all regions of the vast country and beyond. Why should you choose it to expand your investment portfolio?
- Large company with social projects. Gazprom alone produces more than half a billion cubic meters of gas each year. At the same time, it periodically carries out the exploration of new gas deposits. In percentage terms, the giant holds around 20% of all global gas reserves, and this is an incredibly strong figure. In addition, the company is actively diversifying its business, participating in the large-scale gasification of regions and the formation of a gas engine fuel market. At the same time, the corporation does not forget about charity. Environmental aspects are also important for this, ie the safest possible extraction of natural resources.
- Half of the shares belong to the state.. This simple fact implies a lot, in particular, the negligible probability that the company will fall to the bottom of the stock market or cease to exist. Today, Gazprom contributes about 7% of GDP to the Russian Federation, which is considered a very high result. Therefore, the State is not interested in the deterioration of the company’s results.
- financial sustainability. The registered capital of the corporation is more than ₽10 billion, the gas transmission network is the largest in the world. Many believe that a company’s IOUs indicate its high potential, as investors generally do not invest in unpromising companies.
- Availability of long-term contracts. 40% of European gas has Russian roots and the source of supply is the Nord Stream gas pipeline. This situation will continue for a long time, because alternative sources are still few. Also, for 2035-2038. Germany plans to stop using coal as a source of energy. Consequently, the consumption of natural gas in the European direction will increase significantly. China remains a major customer of Russian gas companies. And since the world’s most populous country is highly developed in industry and manufacturing, only serious supplies can meet your needs.
Gazprom is an open company, every quarter and every year it publishes reports on its activities for public viewing. These data allow a potential investor to calculate in advance all the necessary indicators.
Judging by the documents, every year the Russian giant records revenue growth, although in 2019 the figure dropped slightly to ₽4,759 million compared to 2018 (₽5,179 million). The main source of income is the supply of natural gas abroad.
What are the prospects?
At least in the payment of dividends. At Gazprom, this happens once a year. The company now allocates 26% of its profits to these purposes, which indicates the stability of profits and the conservative (read correct) approach of management to the distribution of income. The decision on the amount of dividend payments to shareholders is made at the general meeting of shareholders (AGM).
After each such event, the probability of an increase in values increases, so experts recommend acquiring assets up to this point. The company also plans to increase payments in the near future as the share price and operating profitability increase.
According to a Refinitv survey, analysts are forecasting an increase in the share price of around 20% in the next twelve months. That’s why they recommend buying securities right now.
Remember that the desire to earn money, even with dividends from Gazprom, is commendable. But at the same time, you must strictly adhere to such simple, but important rules:
- Do not invest all your money in a single company. Buy securities and other companies. Buy a small number of shares at first and wait for them to rise in value. Then a part can be sold to obtain profits, and leave a certain amount of the Central Bank in the calculation for the payment of dividends.
- Don’t take loans. Only use the amounts you already have at your disposal. Such a smart approach will avoid unnecessary risks.
The risk-free way of investing in the stock market can also be achieved indirectly, for example with the help of a bank deposit. The process will look like this:
- deposit a certain amount in the first year;
- in the second year, invest the profits in stocks;
- at the end of the second year, receive deposit earnings and stock dividends. With this income, repurchase a certain amount of assets.
This can continue further, very smoothly increasing the investment portfolio, which does not affect the main income and does not require the use of leverage.
This method takes time, and you should not count on real income “already tomorrow”, especially if the shares generate low dividends. But something else is important here: your initial capital remains intact.
This approach is often practiced by people who are not dependent on government assistance in old age and who want to ensure a comfortable existence for themselves in adulthood. In this case, you can be sure that, in the long run, the stock is more likely to go higher than lower.
How to buy?
You can buy Gazprom shares using the following algorithm:
- Choose a broker and register an account. You must be licensed as a professional stock market participant. In Russia, the most reliable brokers are banks: VTB, Tinkoff and Sberbank. Each of them has unique characteristics, but also the highest reliability.
- Deposit money into the account. The first installment can be anything. It is to be expected that the funds will be frozen for some time. Using leverage is not recommended, because stocks don’t always go up immediately.
- Study the operation of the QUIK commercial terminal. If you have any questions, you should contact the support service – they will help you solve all the problems that are within their competence.
It should be noted that the acquisition of assets without leverage implies the deposit of the full amount previously planned by you in the broker’s account. Only in this case will you be able to complete the transaction. Gazprom shares are traded in T+2 mode. This means that after the acquisition of the specified amount of assets, they will be able to enter the account only after two days.
Shares cannot be acquired on the day of collection of documents on the shareholders of the company before the accrual of dividends. This must be done at least two days in advance. Otherwise, you will not be listed and payments will roll over to the next year. You can check the registration closing date on the company’s website.
It is also necessary to take into account the dividend gap, that is, the decrease in the value of the shares on the day the shareholder register closes. The price is reduced as much as the dividends per share will be paid. If you don’t want to buy securities at this time, you can do so after payments, at a discount. The post-gap period is sometimes marked by a drop in the asset, and sometimes a return to previous values.
Additionally, keep in mind the commission, since both the broker and the stock market have it. You will have to pay for each transaction you make. When using some exchange programs, you will also have to pay additional fees.
All these nuances are very important, and taking them into account will allow you to calculate the amount that you will need when buying Gazprom shares.
Experts believe that investing in Gazprom does not carry any direct risk to the investor’s capital. The growth of the company’s attractiveness is reinforced by the ongoing development program: in particular, through the launch of three major gas pipelines: Power of Siberia, Turkish Stream and Nord Stream-2. All this increases Gazprom’s rating and, accordingly, the amount of dividends. Of course, do not expect excessive returns, since the giant is developing at a moderate pace and no great progress is expected.
Therefore, investing in Gazprom shares is quite a profitable way to diversify your investment portfolio with reliable assets. The correct strategy, which involves buying low and selling high, will make the investment as profitable as possible.
Disclaimer. Investing in any financial asset carries the risk of losing capital. Nothing in this text can be considered an investment recommendation or an offer to buy/sell any financial instrument. For all their actions in the stock market, each investor independently bears full responsibility.