Iron ore dividend bonanza has legs William McInnes William McInnes Reporter Feb 10, 2021 – 4.32pm Save Share The dividend bonanza awaiting investors in the major iron ore miners this reporting season could extend until next year, with the spot price of the bulk set to remain firmly elevated until at least the end of the June half. BHP Group, Rio Tinto and Fortescue Metals Group are all expected to pay out a record regular dividend to shareholders when they report later this month. However, the strength of the iron ore price means the miners could remain cash cows for some time. Katana’s Romano Sala Tenna. Tony McDonough On Tuesday, the price of spot iron ore rose 2.2 per cent to $US164.10 a tonne and has only fallen below $US150 a tonne once so far this year. “This is going to have longevity across more than one reporting season,” Katana Asset Management portfolio manager Romano Sala Tenna said. “If you look at what BHP and Rio are doing, they’re still paying out at really low payout ratios. They’re still keeping a fair bit in reserve.” Advertisement While NAB is expecting iron ore prices to begin to decline towards $US100 a tonne by early 2022, prices are expected to be supported over the next few months. NAB’s Lachlan Shaw. James Alcock “Ultimately, it’s hard to say with conviction if the price lifts or falls from here,” NAB head of commodity research Lachlan Shaw said. “The market is discounting a strong demand lift through the second quarter so if we see demand lift, but not by as much as expected, then there’s potential for the price to come off.” He said that barring a significant supply shock the price was likely to still trade in the $US150 to $US170 a tonne range after Chinese New Year. But the strong dividends could remain even if the price of iron ore tails off, as the major miners are keeping plenty of cash on the sidelines. “They’ve been disciplined in acquisitions and we’re also seeing some sustainability in how they’re paying out their dividend,” Mr Sala Tenna said. “The number will come back a bit but the visibility over the next two halves guarantees a good dividend over the next few years.” On Wednesday, Mineral Resources paid out a record dividend of $1 a share, well ahead of consensus forecasts of 82¢ a share, driven by a boom in iron ore prices through the final six months of 2020. “Most of the [mining] companies find themselves in a position where they have been able to build excess cash on the balance sheet and are returning it in the form of dividends, buybacks and acquisitions,” RBC Capital Markets analyst Paul Kaner said. “Absent any known M&A or additional buybacks, we should see companies deliver higher capital returns.” UBS is forecasting BHP Group will pay a record regular dividend of US91¢ ($1.18). The company paid a $1.42 a share special dividend in 2019 following the sale of its onshore oil and gas assets in the United States. Rio Tinto is also expected to pay a record payout, with consensus forecasts predicting a $4.20 a share interim dividend. UBS is predicting Fortescue Metals Group will pay a record $1.45 a share interim dividend, almost double the 76¢ a share first half dividend it paid last year.
Iron ore dividend bonanza has legs William McInnes William...
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