The FTSE 100‘s miners have certainly been under pressure, but the tide looks like it’s turning — and those deliciously high dividends might not be available at such low prices for much longer. Here are three offering 5% or more, and climbing:
Rio Tinto
With Rio Tinto (LSE: RIO)(NYSE: RIO.US) being able to sell all the valuable dirt it can dig up, even at today’s low commodities prices, it’s no great surprise to see its dividend motoring along nicely. For 2014, Rio was able to boost it by 12% to 215 cents per share, for a yield of 4.8% — and after seeing net debt reduced by 31% over a year previously, the company also announced a $2bn share buy-back.
Chief executive Sam Walsh reckoned he had “confidence in our ability to continue to generate sustainable returns for our shareholders“, and that’s led analysts to forecast further dividend rises for this year and next, providing yields of 5.4% and 5.8% respectively on a share price of 2,844p.
The share price itself has come up from its December bottom, gaining 11% since then. If sentiment is finally improving, we could be close to the end of cheap mining shares and very high yields, giving us a nice buying opportunity right now.
Anglo American
The Anglo American (LSE: AAL) share price hasn’t really started picking up yet, and at 1,040p it’s down 31% over the past 12 months. But with the recent fall in earnings expected to turn round in 2016, that puts the shares on a P/E multiple of 13 for this year, dropping to under 10 for 2016. And it keeps the dividend yield high too, with yields of 5.5% and 5.6% expected for the two years. Those should be pretty well covered too, so are we looking at another bargain?
Net debt did rise last year and is expected to peak at $13.5-$14bn this year, but the firm has a long-term target of $10-$12bn, and chief executive Mark Cutifani was waxing enthusiastically about “sustainable capital returns to shareholders“.
Anglo American seems a little behind its peers in turning itself round, but the resulting lower share price means it has to be worth a closer look.
BHP Billiton
Our third, BHP Billiton (LSE: BLT)(NYSE: BBL.US), has seen the best share price recovery since December’s lows, with a gain of 15% to 1,470p, and it’s pushed its shares to a P/E rating of around 15. That’s not surprising after the half-year to December saw an overall 9% increase in production, with metallurgical coal up 21% and Western Australia iron ore production reaching record levels.
The dividend for the half was lifted by 5%, and the firm told us that if it is successful in its proposed “South32” demerger, the dividend will not be rebased and the underlying payout ratio will actually strengthen.
That all helps BHP to the biggest forecast dividends of the three, with a yield of 5.5% on the cards for the full year followed by a whopping 6% in 2016. That’s got to be attractive.
