MTS Reports 46% Net Profit Growth and Recommends Dividends
Russian telecom group posts strong Q1 financial results, beating market expectations for operating profit. The company's board of directors also recommended paying dividends for 2025 at 35 rubles per share.
69.9 billion rubles for dividends: MTS pays, AFK Sistema receives
Net profit up 46%, dividend at 35 rubles per share. The market is jubilant. But who actually gets those 69.9 billion rubles, and why can't MTS cut payouts even if it wanted to?
[The Gist]: What's Really Happening
On May 22, 2026, MTS published its Q1 results. The numbers are impressive:
- Revenue: 201.3 billion rubles (+14.7% year-on-year)
- OIBDA: 74.7 billion rubles (+18%)
- Operating profit: 41 billion rubles (+28.7%)
- Net profit: 7.2 billion rubles (+46.4%)
The board also recommended dividends for 2025 at 35 rubles per share. At the current price of around 230-235 rubles, that gives a dividend yield of about 15%.
The total payout will amount to 69.9 billion rubles.
The market reacted instantly: MTS shares rose 2.85% at the peak to 234.5 rubles per share.
At first glance, it's a perfect dividend story. But an insider view reveals a completely different picture.
The main beneficiary of these dividends is not minority shareholders, but Vladimir Evtushenkov's AFK Sistema, which owns 42.09% of MTS shares.
This means that out of 69.9 billion rubles in dividends, about 29.4 billion rubles will go directly to Sistema.
And here lies the main answer to the question that the news doesn't ask.
Timeline and Context
Key date: 2024. That's when MTS approved its current dividend policy for 2024-2026. The main point: at least 35 rubles per share per year.
This is not management's "generosity." It's a hard constraint.
Why 35 rubles, rather than a link to net profit or free cash flow? Because AFK Sistema needs predictable cash flows.
Evtushenkov's holding is a complex structure with its own debts and obligations. MTS is its "cash cow." Each year, Sistema receives about 29.5 billion rubles in dividends from MTS.
May 22, 2026 — MTS publishes its results. Net profit (7.2 billion rubles) came in below the consensus forecast. Analysts expected around 9.3 billion rubles.
Reason: financial expenses remained at last year's level — 34.4 billion rubles. The company couldn't cut interest payments as quickly as the market hoped.
But that didn't stop the board from recommending a dividend of exactly 35 rubles. Because they had no choice.
Next important date: July 8, 2026. This is the last day to buy shares to receive the dividend.
And 2027 will be a year of change. The dividend policy for 2024-2026 ends. The company must present a new one before the next dividend cycle.
Who Wins and Who Loses
AFK Sistema wins directly. 42% of shares = 29.4 billion rubles in dividends. In the holding's current financial position, this money is critically important.
Minority shareholders who bought shares before July 8 win. A 15% yield is one of the best on the Russian market. With the central bank's key rate around 14.5%, MTS dividends look attractive.
MTS as a brand wins. Stable payouts create an image of a reliable company. This supports the share price and eases access to debt financing.
The company loses in terms of development. 69.9 billion rubles go to shareholders. This money could have been invested in new technologies, acquisitions, or debt reduction. Instead, CAPEX rose 29.1% to 44.3 billion rubles — but those investments are funded from operating cash flow, not by cutting dividends.
Bondholders lose (indirectly). MTS must refinance about 420 billion rubles in debt by the end of 2026. Dividend payments reduce the safety margin. While the net debt/OIBDA ratio remains at a comfortable 1.6, any deterioration in operating performance could create problems.
Paradox: MTS's net profit for Q1 was only 7.2 billion rubles. But dividends for the full year 2025 will be 69.9 billion rubles. The company pays shareholders almost 10 times more than it earned in three months. This is made possible by accumulated retained earnings and borrowed funds.
But how sustainable is this?
What the Media Isn't Saying
Non-obvious insight #1: MTS cannot cut dividends even if it wanted to.
42% of shares are owned by AFK Sistema. Another 5.56% are held by MTS subsidiaries (Erion LLC and Bastion LLC). Formally, they are in free float, but effectively they are under management control.
52.23% are in free float. But these minority shareholders vote in a fragmented manner.
Who decides on dividends? The board of directors. And who sits on MTS's board? Representatives of Sistema.
If Sistema wants 35 rubles, it will get them. If it wants 40 rubles, it will get 40. If MTS tries to cut payouts, the board simply won't approve such a decision.
Non-obvious insight #2: 2027 will be a moment of truth, but nothing will change.
The current dividend policy ends in 2026. The company is already working on a new one.
Many investors hope the new policy will be tied to a percentage of net profit or free cash flow. Or that the minimum threshold will be raised from 35 rubles to 40-45 rubles.
These hopes are likely to be dashed.
BCS Express writes directly: "We believe that in the next 2-3 years, large payouts from MTS will not go away and will most likely also be specified in the dividend policy as a fixed number, because the company's FCF or net profit indicators are quite volatile."
Why a fixed number instead of a percentage? Because AFK Sistema needs certainty. The holding must plan its debt payments and investments in other assets. 35 rubles is predictable. "35% of volatile net profit" is a risk.
Non-obvious insight #3: MTS's new technology segment is not working yet.
MTS is actively developing its ecosystem: a media holding, advertising technologies (AdTech), MTS Web Services.
Q1 figures:
- AdTech: growth of only 2.3% year-on-year, to 15.3 billion rubles
- MTS Web Services: a decline of 5.3%
Analysts at Freedom Finance Global write directly: "We expected a higher result, specifically from the new services and technology segments."
Where does this lead? For now, growth drivers remain the good old telecom (revenue up 14.7% to 130.3 billion rubles) and the bank (up 18% to 42 billion rubles).
New directions are not yet paying off. Management hopes to eventually take them public via an IPO, but that "eventually" may not come soon.
Forecast: Next 30 Days and 90 Days
Next 30 days (until June 24, 2026): MTS shares will move ahead of the dividend cut-off date (July 8).
Historically, the yield to the record date falls to about 13% — meaning quotes have time to rise, pricing in the upcoming payout. Alfa Investments calculated: if this pattern holds, from current levels (230-235 rubles), quotes could gain up to 16%.
Target: 260-275 rubles by mid-July.
Key risks in the next month:
- General market correction in the Russian market. Oil could fall if the Strait of Hormuz opens, weakening the ruble and potentially causing an outflow from Russian stocks.
- The Fed's rate decision on June 16-17 affects global risk appetite, but only indirectly impacts MTS.
Next 90 days (until August 24, 2026): After the dividend cut-off, shares typically adjust by the dividend amount (about 15%). This could push the price back to 195-210 rubles.
But then a new cycle of waiting for 2026 dividends will begin. Analysts at Veles Capital set a target price of 289 rubles with a "Buy" recommendation. Freedom Finance Global: 270 rubles. PSB: 275 rubles.
My forecast: by the end of summer, MTS shares will trade in the range of 230-250 rubles, pricing in expectations of a new dividend policy.
Main long-term risk: The new dividend policy may disappoint the market. If MTS keeps 35 rubles for 2027 without an increase, that would be neutral to negative. If it cuts to 30 rubles, shares could fall 15-20%.
But BCS Express believes Sistema won't allow a sharp cut: "The holding receives about 29.5 billion rubles in dividends from MTS per year, and we believe that in its current financial position, Sistema is clearly not interested in a sharp reduction in dividend flow."
Most likely, the new policy will be in the range of 30-40 rubles per share.
Editorial Forecast
- Asset: MTS shares (MTSS) / Direction: Up in the next 2-3 weeks, followed by a correction.
- Key levels: Current level: 232-235 rubles. Nearest target before the dividend cut-off (July 8): 260-275 rubles. After the cut-off, we expect a correction to 195-210 rubles.
- Confidence level: Medium. The dividend driver is clear and predictable, but general market risks (geopolitics, oil, rates) could disrupt this dynamic.
- Main risk to the forecast: A sudden tightening of the Central Bank of Russia's monetary policy (key rate hike) could make MTS's dividend yield less attractive compared to rising deposit and bond rates. Also, if MTS announces an early revision of its dividend policy with lower payouts, it would crash the shares regardless of the dividend season.
— Editorial Team
