The beleagured polyhalite miner Sirius Minerals (LSE: SXX) updated investors about developments for its ‘alternative proposal’ yesterday. This proposal looked into the possibility of debt financing from a consortium of financial investors. According to the update the proposal is no longer viable. As a result, the board is once again asking shareholders to vote in favour of the acquisition deal put forth by the FTSE 100 multi-commodity miner Anglo American. Otherwise, Sirius Minerals could face liquidation.
Getting back on track
Only time will tell how the SXX story will go now. If the acquisition goes ahead, many investors will lose money. At some point or other, most of us have had to lick our wounds over poor investment calls, but we have learned that moving forward fast and trying to make better investing decisions is the surest way to get ahead again.
For those who are put off growth investing for the moment, but still have a risk-taking streak, I’d like to suggest the FTSE 100 tobacco giant Imperial Brands (LSE: IMB). Its current dividend yield of over 11% is equal to the capital gains on some moderate growth stocks. Its yield is also second only to the miner EVRAZ among companies in the FTSE 100 set.
Some risks ahead…
The reason Imperial Brands is risky is that there’s no guarantee the company can maintain its dividends. It released a disappointing trading update last week, and now expects both lower revenues and adjusted earnings per share. Its share price fell 8% on the announcement and hasn’t recovered since. At any other time, investors might not have reacted as strongly. In the past, Imperial had a policy of increasing dividends by 10% every year. Last year, however, it said it would link its dividends to earnings going forward. Considering its disapponting latest earnings’ outlook, along with its new progressive dividend policy, IMB’s dividends now carry a risk.
…but calculated ones
If I were to invest in IMB, though, it would be a calculated risk. For 2019, it paid a total dividend of 206.6p per share. At today’s share price, IMB’s dividend yield is 11.3%. If it were to cut its dividend into half, the yield would still be 5.7%. This is well over the average yield of all FTSE 100 companies put together. Further, if the dividend payout is withheld with a view to reinvestment in the company, that can also be good for its share price in the long term.
My view in a nutshell is that IMB’s very far from being a total loss. Despite a continued fall in its share price over the past few years, IMB is no Sirius Minerals. It’s a large FTSE 100 stock that has presence across countries and has consistently seen substantial, rising revenues. But its dividend yield does carry some risk. If you are most risk averse, there are safe stocks among FTSE 100 companies to consider too. They might not promise as high incomes, however.
