Many of Russia's biggest state-owned firms are paying out dividends to shareholders, who bought into them in so-called people's IPOs, despite falling profits and big falls in their stock price since they went public.

At a time of financial crisis, Russian government officials have expressed a desire for state companies to economize on the payment of dividends.

One of Russia's largest banks, VTB, held Russia's second largest float in 2007 – a move which drew significant public interest. The stock has since lost about 75% of its value, but despite that, VTB has acknowledged a duty to pay its shareholders.

Last month, the head of the bank said it could pay more than 10% of its profits in 2008 dividends. Rostislav Musienko, Senior Analyst, at the Bank of Moscow says this is, in part, to placate investors who have seen their initial investment take an absolute hammering.

“When a bank has to provide an additional share issue to spend part of profits to pay dividends – it looks quite illogical. But it’s the only way to calm down shareholders who are upset about drops in share price.”

Russian oil company Rosneft launched a $10.6 billion dollar IPO in 2006. Its decided to pay Rouble dividends 20% higher than last year. However, the amount is 15% less in dollars due to the fall in the Russian company, and Ronald Smith, Head of Research at Alfa-Bank, believes it could have gone a little further.

“The difference between not paying the same amount as they did last year in roubles or increasing it by 20% is a 100 to 150 million dollars total. Not material. You measure debt in millions and revenues in billions. It's a very small percentage of the cash flow.”

The experiment in so-called peoples' IPOs has not been an entirely successful one in the short term. Investors will be watching closely to see how dividends rise as Russia's economy emerges from the world economic crisis in the near future.