Mining and Energy investments that delivered good dividends in 2017

It is generally seen that investors do not expect to have great dividends from mining and energy investments at the back of the cyclical movements and impact from macro trends. However, 2017 changed the trend a bit with growth in dividends from miners in support from a healthy recovery in commodity prices coupled with improved cash flow. The trend might continue through to 2018.


Dividend Details of 4 Mining and Energy Stocks; WPL and BHP in US Cents

In support of the growth trend of dividends, Rio Tinto Ltd (ASX: RIO), a mining and metals giant, was seen to have delivered great returns to shareholder over the year and had indicated its intention to supplement the ordinary dividends with additional returns to shareholders. The board has been working on the dividend policy and aimed to determine an appropriate total level of ordinary dividend per share, taking into account the results for the healthy financial year and the outlook for major commodities. RIO has also signalled to have total cash returns to shareholders over the longer term to be in a range of 40 to 60 per cent of underlying earnings. The group has also lately completed A$750m off-market buy-back.

Woodside Petroleum Ltd (ASX: WPL), an oil and gas company,is another player that increased its dividends from 2016. WPL expects to have a minimum pay-out ratio of 50% of net profit with a long-term aim to achieve 80 per cent target.The group had declared afully franked 2017 interim dividend of US 49 cents, which was 44 per cent higher than H1 2016 at the back of better net profit after tax result. Out of the key projects of WPL, namely, North West Shelf (NWS) Project, Pluto Liquefied Natural Gas (LNG) and Australia Oil, Pluto has shown some significant momentum based on potential exploration, evaluation, development, production and sale of liquefied natural gas and condensate in assigned permit areas. WPL thus aims to keep on delivering good returns at the back of progress at key projects and financial performance.

BHP Billiton Ltd (ASX: BHP), a global resources company and producer of various commodities including iron ore, metallurgical coal, copper and uranium, has delivered over US$12 billion of annualised productivity gains in last five years with 70 per cent reduction in annual capital expenditure. BHP further aims to have a net debt range of US$10-15 billion in the medium term with capex below US$8 billion for FY2019 and FY2020. In FY17, the group returned US$4.4 billion to shareholders and had determined to pay a final dividend of US 43 cents per share while the group’s dividend policy provides for a minimum 50 per cent pay-out of underlying attributable profit at every reporting period.
 

BHP’s Capital Allocation (Source: Company Reports)

Although low, but on a similar increasing trend Fortescue Metals Group Ltd (ASX: FMG) has delivered an increase in dividends over the year. The group is engaged in the exploration, development, production, processing and sale of iron ore, and has lately witnessed a lot of movement with volatile commodity prices (down 16% in last three months, as at November 16, 2017). The group now insists to have a new, more generous, dividend policy despite the inevitable gyrations of the iron ore market. The group instituted a new dividend policy of 50-80 per cent pay-out of profits (52 per cent in FY17) and its initiatives are said to be delivering low cost outcomes (US$12.15 in Q1 FY18). It is worth noting that the group’s earnings per share zoomed up 113% in FY17.

Thus, 2017 has been a year where the share market, and particularly, mining and energy sector was seen to have delivered a good stream of income at the back of improved profits while players like Telstra announced for a dividend slash. The recent fall in profit result for such players seems to be having an impact on 2018 overall dividends and it will be worth watching how the investors benefit from the market trends.

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