ALROSA’s Board has approved a financial policy that allows the diamond miner to pay out dividends twice a year. It also recommended that the company pay its shareholders an interim dividend of at least RUB 5.93 ($0.09) per share for the first six months of this year.
The company will use its free cash flow -- the operating cash flow net of capital expenditure -- as a new basis for calculating dividend payments. The dividend payment will be guided by the net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) ratio. This ratio shows how many years it would take for a company to pay back its debt if net debt and EBITDA are held constant. If a company has more cash than debt, the ratio can be negative.
ALROSA’s board has recommended that if the ratio is indeed in the negative range (below 0), annual dividends will 100 percent of the free cash flow for the reporting period. If it is between 0 and 1, the dividend payout should be between 70- and 100 percent of the free cash flow, while payouts will be between 50- and 70 percent if the ratio is between 1 and 1.5.
Dividends will only be paid if the net debt to EBITDA ratio is below 1.5.