Oil stock Petrobras’ (NYSE:PBR) recent move regarding its dividend should have had much more troubling consequences than it did. While there certainly was a fallout connected with it, investors were clearly inclined to give Petrobras the benefit of the doubt. In fact, Petrobras stock was up fractionally in Monday afternoon’s trading.
Petrobras CEO Jean Paul Prates got called on the carpet by no less than the president of Brazil himself, Luiz Inacio Lula da Silva. Lula’s primary issue that he sought Prates’ input on, was why Petrobras shareholders were looking for a special dividend when that money should have been routed into job-producing projects.
Following debate on the matter, Prates ultimately abstained from the vote instead of voting against the proposal, which was ultimately rejected by much of the government-appointed board. Lula might well have been feeling some heat on this matter himself; his polling numbers have been in open decline of late, and new oil jobs with Petrobras might be helpful in turning that around.
Eating the Seed Corn
Here, Prates has something of a difficult balance to strike. While, indeed, he’s got some governmental responsibilities to factor in, he’s also running a business, one that has to keep shareholders happy. In fact, Petrobras offered a reduced dividend to its shareholders back on Friday and lost $14 billion in its market cap in exchange. Further, with Petrobras currently reconsidering its fleet size, targeting up to 31 drilling rigs total, its ability to make new jobs may be limited.
Is PBR a Good Stock to Buy?
Turning to Wall Street, analysts have a Hold consensus rating on PBR stock based on one Buy and four Holds assigned in the past three months, as indicated by the graphic below. After a 72.08% rally in its share price over the past year, the average PBR price target of $39.14 per share implies 19.07% upside potential.
