Petrobras: Revisiting a Questionable Investment
Petrobras Explains Reduction in Dividends: Smaller and Smaller Payments Ahead
Welp, here we are again with Petrobras (NYSE:PBR). April 15, 2024, I penned down my first article on this Brazilian oil giant, spilling some serious doubts about their future. And boy, were my suspicions on point! Let's see how things have panned out for these folks.
Today, the talk of the town is about Petrobras' dividend yields, which took a nose dive from a whopping 15% in 2023 to a mere 10% in 2025. That's a significant drop, my friend. And guess what? There's more dive coming as the company focuses on a hefty $14.5 billion capex in 2025, a jump of 25% compared to 2024. Wow, these guys are really pouring that money into renewables and exploration, leaving less green in the pockets of shareholders.
But it's not just about the dough. Oh, no! There's politics and governance issues to worry about too. The government is keeping a close eye, redirecting funds for state projects, squeezing Petrobras' dividends. There's also this shift from international benchmarks to discretionary pricing, exposing Petrobras to cost absorption risks. And let's not forget the revolving door at the top. In just three years, they've had six different CEOs! That's more than a change of clothes, am I right?
In April 2025, this leadership volatility nearly sent shares plummeting with a whopping 7.86% single-day drop. Ouch! And if you thought that was it, think again. Petrobras is trading at a paltry 3.6–4.6x forward P/E, significantly less than ExxonMobil (XOM) and Shell (SHEL), which are sitting pretty at around 10x.
Now, let's talk about performance. Petrobras shares took a hit in April 2025, losing a pretty penny at 21.54%. That's a hefty loss compared to the S&P 500 (-0.7%) and energy sector (-11.18%) during the same period. And things don't look too peachy when you consider that their Q1 2025 EPS is projected to rise by 21.33% YoY, but their annual revenue forecasts show a 6.2% decline.
But it's not all doom and gloom. Petrobras is investing in clean energy ventures and exploring international trade deals, which could offer long-term growth potential. However, execution risks remain amid fiscal and political headwinds.
In conclusion, despite the potential upside from the valuation discount and energy transition strategy, the dividend cuts, political interference, and macroeconomic volatility suggest a word of caution. Analysts currently rate PBR a Hold, reflecting its risky, risky business profile that hinges on oil prices and policy stability. Yup, April 2024's skepticism has proven to be warranted indeed. Buckle up, folks! It's gonna be a bumpy ride.
- Considering the current state of Petrobras, investing in their shares might be challenging, as they have a high focus on capital expenditures in renewables and exploration, which could potentially reduce the dividend yields for shareholders.
- In comparison to other oil giants like ExxonMobil (XOM) and Shell (SHEL), Petrobras is trading at a significantly lower forward P/E ratio, indicating a potential undervalued investment opportunity.
- It's important to note the political and governance concerns surrounding Petrobras, as the government's close scrutiny over the company and redirection of funds for state projects could further squeeze dividends for shareholders.
- As Petrobras shares dove in April 2025, resulting in a 21.54% loss, and with projected EPS growth but declining annual revenue, the volatile macro-economic climate and ongoing leadership instability call for a cautious approach when considering an investment in Petrobras.
