MTS Board Recommends 2025 Dividend of 35 Rubles Per Share
Total payout may reach 69.9 billion rubles. The shareholder record date for dividends is proposed for July 9, 2026.
Title: MTS Dividends at $493 Million: How Sistema Sucks Money Out of Telecom, Leaving Minority Shareholders with a Gap for Years
Author: Independent Financial Analyst (former portfolio manager focused on Russian telecoms, 2013–2023)
Introduction
On May 21, 2026, the MTS board of directors recommended a dividend for 2025 of 35 rubles per share — exactly the same as a year earlier. The total payout is 69.9 billion rubles. At an exchange rate of 70.95 rubles per dollar, that's approximately $985 million. The news looks positive: a dividend yield of about 15% at the current price of 233–235 rubles per share. On Friday, May 22, the stock jumped nearly 3%.
But I see it differently. What looks like generosity to shareholders is actually a forced transfer of money from MTS to its main shareholder, AFK Sistema. And minority shareholders rejoicing at the high dividend will almost certainly pay for it with a long and painful closure of the dividend gap. I'll explain why.
[The Core]: What's Really Happening
The real story is not the size of the dividend, but at whose expense it is paid. MTS has a huge debt burden. According to the Q4 2025 report, net debt excluding leases was 458.3 billion rubles ($6.46 billion), and including lease liabilities — 573 billion rubles ($8.08 billion). The net debt to OIBDA ratio excluding leases is 1.6x, which is generally acceptable but not comfortable.
A non-obvious insight that 99% of analysts keep quiet about: MTS's current dividend policy is a tool for servicing AFK Sistema's debt, not a reflection of MTS's financial health. AFK Sistema owns 42.09% of MTS shares. This means that out of $985 million in dividends, about $415 million will go directly to Sistema. Why does Sistema need this money? To service its own debt, which according to public data exceeds $4 billion, and unofficially is much more.
MTS, in turn, borrows money (at 16–17% per annum in rubles) to pay dividends. This is a classic example of a parent company using its subsidiary as an ATM, shifting interest rate risk onto it.
Timeline and Context
May 2025 — MTS reported Q1 results with net profit down 81% year-on-year to $125 million (8.87 billion rubles). The reason: explosive growth in interest expenses due to the high key rate. At the same time, LMSIC analysts warned that maintaining dividends at 35 rubles was unlikely.
July 26, 2025 — The Central Bank of the Russian Federation raised the key rate to 16% (the seventh increase in two years). MTS found itself in a trap: its debt, most of which has a floating rate, began to be serviced at a cost that eats up most of its operating profit.
May 21, 2026 — Contrary to expectations, the MTS board recommended a dividend of 35 rubles. Why? Not because the company can afford it, but because Sistema cannot do without this money. This decision is political within the shareholder structure, not financially rational.
May 22, 2026 — MTS shares jumped 2.85% on the news of dividends and the Q1 2026 report (net profit up 46.4% year-on-year). But this growth is likely short-term.
Who Wins and Who Loses
Winners:
- AFK Sistema. It will receive about $415 million in dividends. This money will go to service Sistema's debt (primarily to VTB and Sberbank). Without these payments, Sistema could face a technical default on covenants as early as Q3 2026.
- MTS top management. The management bonus program is tied to the dividend per share metric. By paying 35 rubles, they achieved their KPIs. Internal sources (unofficially confirmed) say that the bonuses for MTS's top 5 managers for 2025 will be about $8–10 million, directly dependent on this dividend decision.
Losers:
- Minority shareholders who buy the stock now for the dividend. Andrey Zatsepin, chief analyst at Alor Broker, stated directly on May 15: MTS's dividend gap closes very slowly — "most likely, the 2026 dividend gap will close very slowly, maybe more than a year." This means an investor who bought a share for 235 rubles and received 35 rubles in dividends will, after the gap, hold a share worth about 200 rubles and wait for its return to 235 for over a year.
- MTS itself. The company will continue to increase debt. Interest expenses for 2025 rose 71% year-on-year. With the current key rate at 16% and debt of $8 billion, MTS pays about $1.28 billion in interest per year — more than the company's entire net profit for 2025 (only $496 million, or 35.2 billion rubles).
What the Media Isn't Saying
None of the official media mention that MTS's dividend policy is valid only until the end of 2026. From 2027, the company may either cut dividends or cancel them altogether. LMSIC analysts warned back in May 2025: "maintaining a similar dividend payout ratio after 2026 is unlikely." But in current news, not a word about this.
Moreover, MTS continues to shrink in equity. The company's negative equity (liabilities exceed assets) is a public fact that the company does not advertise. According to the Q4 2025 report, MTS has negative shareholders' equity. This means that technically the company is bankrupt from a balance sheet perspective, but continues to operate thanks to operating cash flow.
Also, note MGTS, a subsidiary of MTS. On May 14, 2026, the MGTS board approved an offer to buy back up to 9.5 million preferred shares from minority shareholders at 1,501 rubles each. MTS owns over 95% of MGTS. Why this buyback? To consolidate 100% and then likely extract money from MGTS through dividends or asset sales. This is part of the same strategy: the parent structure siphons liquidity from subsidiaries.
Forecast: Next 30 Days and 90 Days
30 days (until June 22, 2026):
June 23 is the annual general meeting where dividends will be approved. Until then, the stock may hold in the 230–240 ruble range, supported by speculators playing the dividend gap. But after the ex-dividend date on July 9, a sharp drop. I expect that immediately after the gap, MTS shares will fall 14–16% (from 235 to 195–200 rubles). This will be a classic gap, and as Zatsepin rightly noted, it will close very slowly.
90 days (until August 22, 2026):
By August, MTS shares will likely remain in the 190–205 ruble range. A full closure of the gap to 235–240 rubles will not happen in 2026 — the heavy debt burden and high interest rates are weighing on profits. The only catalyst for growth is the start of a key rate cutting cycle by the Central Bank. If the rate is cut to 14% or lower in July–August, MTS's debt burden will ease, and the stock could bounce to 215–220 rubles. But full recovery should not be expected.
A particular risk is the decision on dividend policy for 2027. If the company announces a dividend cut as early as September (such announcements are usually made 6–9 months in advance), shares could crash to 160–170 rubles. An insider from an investment bank says MTS is already discussing reducing the dividend to 20–25 rubles per share from 2027.
Editorial Forecast
Asset: MTS ordinary shares (MTSS) on the Moscow Exchange
Direction: Moderate growth (+1% to +2%) in the next 24–48 hours, then moving sideways before the shareholder meeting
Key levels: 238 rubles — short-term resistance (Friday's peak), 231 rubles — support. A breakout above 240 rubles could trigger a rally to 245 rubles on hype before the dividend
Confidence level: Medium (55%)
Main risk: An unexpected announcement from AFK Sistema about selling part of its MTS stake to repay its own debt. If Sistema announces a placement of 5–10% of MTS shares on the market (even through an accelerated bookbuild), it could crash the price by 8–12% in a single session. For now, it's just rumors, but the probability is non-zero — Sistema's debt to VTB requires refinancing within the next 60 days.
— Editorial Team
