Shares of Qiwi (NASDAQ:QIWI) recently tumbled after it posted mixed fourth-quarter numbers. The online payments company's adjusted revenue rose 7% annually to 6.25 billion rubles ($101 million), narrowly missing estimates by 60 million rubles.

Qiwi's non-GAAP net income rose 15% to 1.17 billion rubles ($18.9 million), or 18.74 per ADS, which beat estimates by 0.05 rubles. Those numbers looked solid, but the novel coronavirus pandemic and the ongoing oil price war between Russia and Saudi Arabia are sparking concerns about its near-term growth.

Qiwi also reduced its quarterly dividend from $0.28 to $0.22 per ADS, but that still equals a forward yield of 9.5% -- which could look attractive to investors seeking big dividends in a volatile market. So is the "Russian PayPal (NASDAQ:PYPL)" a high-yield hidden gem?

Qiwi's mobile app.

Image source: Qiwi.

Understanding Qiwi's business

Qiwi generates most of its revenue in Russia, but it's actually based in Cyprus. Its payments network also includes countries in Eastern Europe, the United Arab Emirates, and other overseas markets.

Qiwi processes payments through its Qiwi Wallet app, kiosks, and terminals. It also offers Visa-branded prepaid cards, pay-by-installment cards, and digital banking services to retail customers and small- to medium-sized businesses via its Tochka banking unit. It also owns another banking brand, Rocketbank, but it recently decided to shutter the subsidiary after failing to find a buyer.

Qiwi generated 78% of its revenue from payment fees during the fourth quarter. Another 9% came from interest payments, 4% came from fees from inactive accounts and unclaimed payments, and the remaining 9% came from other businesses.

Qiwi's main rivals in Russia include the search giant Yandex (NASDAQ:YNDX), which integrates digital wallet and payment services into its sprawling ecosystem, as well as PayPal, WebMoney, and Sberbank Online. That crowded market doesn't give Qiwi much room to raise its payment fees.

How fast is Qiwi growing?

Qiwi's revenue and earnings growth have been volatile over the past five years as it struggled with macro and currency headwinds in Russia. The acquisitions of Tochka and Rocketbank in late 2017 temporarily boosted its revenue in 2018.

Growth (YOY)

2015

2016

2017

2018

2019

Revenue

16%

4%

24%

49%

18%

Net profit

18%

14%

(14%)

2%

61%

YOY = Year-over-year. Non-GAAP. Source: Qiwi annual reports.

Qiwi expects its adjusted net revenue to rise 3%-13% in 2020 (with -3% to 5% growth in payment services revenue), and for its adjusted net profit to rise 10%-30%. Those growth rates look stable, and Qiwi's stock trades at less than six times the midpoint of its adjusted earnings forecast.

However, Qiwi's estimates are also incredibly wide because they don't fully account for the impact of the coronavirus crisis, plunging oil prices, and the devaluation of the ruble against other currencies yet. It also expects to ramp up investments in new payment services throughout the year.

To reflect those challenges, Qiwi is reducing its target dividend payout ratio from 60%-85% in 2019 to "at least" 50% in 2020. However, its forward yield of nearly 10% and its low P/E ratio could set a floor under the stock -- which has already declined more than 50% this year.

Is Qiwi a high-yield hidden gem?

Qiwi's downside potential seems limited, but it faces unpredictable headwinds in its biggest market. Russia's COVID-19 numbers are notoriously opaque, and its oil price war could result in another major decline in the ruble -- which could force Qiwi to reduce its guidance.

Qiwi is still a good speculative stock, but investors looking for a high-yield stock can find plenty of battered income stocks with more reliable business models. Meanwhile, investors who want a high-growth digital payments play should consider sticking with a better-diversified company like PayPal instead.