This FTSE 100 giant will hike its dividend by 499% this year

Love dividends? You need to take a look at this Footsie giant.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As a strategy for growing your wealth, dividend investing takes some beating. It’s easy to understand — simply receive, reinvest, repeat — and requires relatively little effort from an investor beyond picking out companies that not only offer decent payouts but look likely to continue doing so.

Based on the proposed hike to its dividend, one company that appears to fit the bill is FTSE 100 mining giant Glencore (LSE: GLEN).

Multi-bagging miner

As recoveries go, Glencore’s is truly impressive. Since plummeting to around the 70p level back at the start of 2016 amid concerns over the amount of debt on its books following its merger with Xstrata, the stock has more than four-bagged in value. For such a massive company, that kind of share price gain is quite staggering. Buy on the (big) dips, indeed.

To recap, it announced its strongest year on record back in February. As a result of excellent performance in its marketing division, adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose 44% to $14.8bn — higher than analysts were expecting. 

Revenue rose 25% to $205bn thanks to an improved commodities market and the company returned to profit of $6.2bn from a loss in the previous year.

It gets better. Following through on its goal to reduce borrowings, the company announced a huge drop in debt from $15.5bn to $10.7bn. That’s still pretty big but nowhere near as bad as it once was.

So, what about those dividends? Glencore stated that it would reward loyal shareholders with a 20 cents per share payout in 2018, equating to $2.9bn in total. According to Stockopedia, the total dividend is forecast to rise 499% (from the 3.5 cents per share payout owners received last year). 

Can Glencore maintain its share price momentum? If you’re fully signed up to the electric vehicle revolution then it’s easy to be bullish on its future, even if the fact that the mining industry is cyclical must always be borne in mind. The company is a major player in copper and cobalt — two commodities that are predicted to be very much in demand. In addition to this, CEO Ivan Glasenberg has made no secret of his desire to look for possible acquisitions, even if he is still to decide on which commodity he wishes to target.

Want to get on board? The ex-dividend date is 26 April. 

Larger yield

Fellow miner, BHP Billiton (LSE: BLT) is also expected to expected to grow its payout this year, albeit by ‘only’ 32% according to analysts.

While Glencore may have grabbed the headlines, recent numbers from its industry peer have also been pretty decent.

Following “solid operating performance“, the diversified miner revealed underlying EBITDA of $11.2bn in February’s interim results (covering the six months to the end of December).

Like Glencore, BHP announced a reduction in net debt (from $20.1bn to $15.4bn) as a result of “strong free cash flow generation” from rising commodity prices. The interim dividend was also raised by 38% to 55 cents per share. 

So which offers the better deal for those focused on generating income from their portfolio? 

Right now, BHP is predicted to return a yield of 5.8% in the current year. Glencore comes in at a forecast 4.2% but with better cover. Given the importance of picking companies with secure-looking payouts (as opposed to the highest), I’d likely opt for the latter.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Close-up of British bank notes
Investing Articles

£8 per year in extra income for life, for each £100 invested today? Here’s how!

Christopher Ruane explains how he would aim to set up extra income streams for the rest of his life by…

Read more »

Photo of a man going through financial problems
Investing Articles

With a £20K Stocks and Shares ISA, I’d target £1,964 in annual dividends like this

With an annual passive income target close to £2,000, our writer explains how he'd put a £20K Stocks and Shares…

Read more »

Illustration of flames over a black background
Investing Articles

Down 63% in 2024, what’s going on with the Avacta (AVCT) share price?

2024 has been a difficult year for many companies in the biotechnology sector, with the AVCT share price down heavily.…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Here’s how I’d invest £800 the Warren Buffett way!

Christopher Ruane learns some lessons from super-investor Warren Buffett he hopes could improve his own stock market performance.

Read more »

British Isles on nautical map
Investing Articles

Michael Burry just bought 175,000 shares in this FTSE 100 company

Scion Asset Management announced a $6.5bn stake in BP this week. But what could Michael Burry be seeing in an…

Read more »

Young Asian woman holding a cup of takeaway coffee and folders containing paperwork, on her way into the office
Investing Articles

£5,000 in savings? Here’s how I’d aim to start making powerful passive income today

With a cash lump sum to invest, this Fool lays out how he'd start making passive income. He also details…

Read more »

Investing Articles

Just released: our 3 top small-cap stocks to consider buying before June [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

My best FTSE 250 stock to consider buying now for passive income while it’s near 168p

This is a rare stock with a growing underlying business and a fat dividend yield – it’s worth consideration for…

Read more »