Update to Automatic Conversion of Russian ADRs

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The saga with Russian DR programs continues to evolve. I posted a note on Automatic and Forced Cancellation as notified by the depository BNY Mellon on mid-last month. Today BNY Mellon has published the below important update on the automatic conversion of Russian ADRs. As the deadline nears for the cancellation of these ADRs, many investors who still haven’t take action have questions on what would would happen to their holdings. So its important to monitor these developments and take appropriate actions.

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Source: Russia Update to DR Automatic Conversion, Aug 1, 2022, BNY Mellon

Earlier:

Russian ADRs Update: Automatic and Forced Cancellation

Calendar Year S&P 500 Index Returns 1926-2021: Chart

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One of the strategies for building long-term wealth is to invest in stocks. While there are many markets to invest in for American investors, the US equity market has generated excellent returns in the past and continues to remain strong. In a recent post, I noted how US stocks as represented by the Dow have pounced other major developed markets from 2010 to 2021.

The more popular S&P Index has also performed very well over the years. Since 1926, the index has yielded positive returns 74% of the time as shown in the chart below.

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Source: Managing Market Volatility, Russell Investments

Related ETFs:

  1. SPDR S&P 500 ETF (SPY)
  2. iShares Core S&P 500 ETF (IVV)
  3. Vanguard S&P 500 ETF (VOO)
  4. SPDR Portfolio S&P 500  ETF (SPLG)

Disclosure: No positions

FTSE All-Share Intra-Year Declines vs. Calendar Year Returns Since 1986: Chart

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Similar to the S&P 500 Index, the FTSE All-Share Index for the UK equity market has also generated positive year-end returns in most of the recent few years though the intra-year declines was negative. The following chart shows the intra-year highest declines vs. year-end calendar returns for the FTSE All-Share Index from 1986 to 2022 year-to-date:

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Source: The Bear Market issue, Permanent Wealth Partners

Note: The FTSE All-Share Index is comprised of the FTSE 100, FTSE 250 and the FTSE Small-Cap Index in the UK market

From the above-linked piece:

This grey bar shows the end-of-year returns for the FTSE All-Share, but the red dot and number show the scale of the largest intra-year decline from peak to trough. There are 8 years out of 36 where the intra-year decline has been greater than 20%, so just under 1 in 4. And many more at 17%, 18% or 19%.

The key takeaway is that volatility in the markets is a feature and not a bug. Markets never constantly go in one direction. When stocks decline as in the current bear market it is important to keep calm and not react by making rash decisions.

Related ETFs:

  • iShares MSCI United Kingdom Index (EWU)

Disclosure: No positions

Quick Note on Upcoming Dividends from Petrobras

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Major Oil companies are profiting from the sky-high crude oil prices this year. Recent quarterly reports from these firms showed the astonishing profits they earned. Brazilian oil giant Petrobras(PBR) is no exception. On July 28, 2022 Petrobras reported excellent results for 2Q, 2022. Net Income soared to US $10.5 billion, a 26.8% rise from the same quarter of 2021 per Reuters. As a result, Petrobras has announced its plan to send more cash as dividends to its shareholders.

So far this year, Petrobras has already paid out dividends 4 times in May, June and July. The coming dividend payments is in addition to those. Following are the details of this dividend announcement from Google Translate:

Of the amount approved, (i) R$ 3.909190 per share refers to the anticipation of remuneration to shareholders for the year 2022 and will be declared based on the balance sheet as of 30 June 2022; and (ii) BRL 2.822813 per share will be paid to the retained earnings reserve account on the balance sheet of the fiscal year 2021.

Dividends will be paid in two equal installments in August and September, as follows:

Amount to be paid: R$6.732003 per outstanding preferred and common share, as follows:

  • the first installment, in the amount of R$3.366002 per outstanding preferred and common share, will be paid on August 31, 2022.
  • (ii) second installment, in the amount of R$3.366001 per preferred and common share, will be paid in 20 September 2022.

Source: Petrobras Notice (in Portuguese)

Below are some answers to questions US investors may have:

What is the dividend amount that was announced?

R$6.732003 per preferred share and outstanding common stock.

When will this amount be paid?

Half amount in August 31 and September 20, 2022

So what will be the rate for PBR ADR in US dollars?

The ADR to underlying ordinary share is 1:2. Hence one ADR is entitled to R$13.46. Or to put it another each ADR is entitled to 13.46 Brazilian Reals.

R$13.46 is approximately equal to $2.60 based on current exchange rate.

So each ADR will pay $1.30 on Aug 31st and $1.30 on September 20th.These are Gross Amounts. The final net amount that will be received will be less after exchange rate adjustments, dividend withholding taxes, fees, etc.

As a result of great earnings, PBR stock shot up by over 6% on Friday to close at $14.28 on the NYSE. The stock has increased by 30% year-to-date.

For more info checkout:

Petrobras Investor Relations Site

Disclosure: Long PBR

S&P 500 Total Return Ranges by Year from 1926 to 2020: Chart

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Equity markets can be volatile in the short run. But traditionally they tend go higher in the long run. That is why it is always wise to hold stocks for the long term. The following chart shows the annual total returns of the S&P 500 from 1926 to 2020. The histogram shows the number of positive years are much more than the number of years when the market was down.

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Source: Time in the market, not timing the market, is what builds wealth., IG Wealth Management

Related ETFs:

  1. SPDR S&P 500 ETF (SPY)
  2. iShares Core S&P 500 ETF (IVV)
  3. Vanguard S&P 500 ETF (VOO)
  4. SPDR Portfolio S&P 500  ETF (SPLG)

Disclosure: No positions