Higher dividends for mining investors

By Glaiza Gagno | 22 March 2017

In 2015, the commodity market was down and dividend cuts were a norm for metals and mining companies. A recovery in metals prices, coupled with companies' efforts to reduce costs and net debt, have helped improve the financial position of many minors, and shareholders are now reaping the benefits.

Among the 26 metals and mining companies with a market capitalization of over US$10 billion that announced a dividend this year or in 2016, exactly half announced a higher dividend compared with their previous distribution, and only two companies reported a lower dividend. Five of the companies announced their "initial" dividend, while the remaining companies reported an unchanged dividend for their shareholders.

The two largest companies in the list, BHP Billiton and Rio Tinto, both announced a larger dividend compared with their previously announced dividends, by an impressive 264% and 197% respectively.

BHP Billiton reported US$1.2 billion in additional productivity gains compared with the December 2015 half year and expects to have an additional US$1.8 billion in gains for fiscal 2017.

The mining giant did not receive dividends from the Samarco operation during the period. The operation does not have profits available for distribution currently and is legally prevented from paying previously declared and unpaid dividends. That said, during this financial period BHP paid out an additional 10 cents to its minimum 30 cents per share, according to its dividend policy, bringing its total payout to 40 cents per share.

Similarly to BHP, Rio Tinto reported productivity improvements in 2016 that it expects to help generate additional free cash flow up to US$5 billion by the end of 2021. The company announced a dividend this February that is 67 pence higher than the previous dividend (announced in September 2016).

Rio Tinto reported a strong performance in 2016, with net earnings of US$4.62 billion and net debt reduction of 30%. In line with the improved year-end results, the company also announced a share buy-back this year of up to US$500 million in Rio Plc shares.

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Higher dividends for mining investors

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