Article by Nick Evans courtesy of the Australian
Australia’s biggest iron ore miners could hand back close to $20bn to shareholders this week as iron ore prices fuel record dividends.
BHP, Rio Tinto and Fortescue Metals all deliver financial results this week, with analysts tipping record payouts from the big iron ore miners on the back of the strongest pricing in a decade.
Consensus analyst estimates, compiled by Vuma and published on each of the company’s own websites, tip Fortescue to pay $1.329 a share half-year dividend, with BHP’s interim dividend forecast at US84c, and Rio Tinto expected to pay $US4.80 for its full year result
That would equate to a $4.1bn return for Fortescue shareholders, $US4.24bn ($5.5bn) for BHP shareholders across its UK and Australian listed arms, and $US7.77bn for Rio holders.
The total could top $20bn, according to some analysts, with Macquarie tipping Fortescue’s interim dividend at $1.37 — at the top end of its stated payout ratio of 50 to 80 per cent of after-tax profits — and UBS saying the company could pay out as much as $1.45 a share. The top end of analyst estimates for Rio is as much as $US6.17 a share, and $US1.11, according to Vuma.
Even if the majors fail to reach the most optimistic expectations, iron ore’s bull run seems certain to return more to investors than the $10bn paid out last year.
Rio declared a $US1.55 a share (216.47c for Australian shareholders) fully franked interim dividend in July, up 3 per cent on a year earlier and worth $US2.5bn. That was on top of a record $US2.31 final dividend declared a year ago, which returned $US3.6bn to shareholders.
BHP paid US55c for its 2020 financial year, or $US2.8bn, bringing total dividends for the financial year to US120c, or $US6.1bn.
And Fortescue paid $1 a share final dividend, taking its total to $1.76 for the year, or $5.4bn.
Last week Mineral Resources paid out a record $1 a share interim dividend, more than 20 per above consensus forecasts of 82c, driven by the price boom that lifted its iron ore earnings to $582m.
Consensus estimates forecast Rio Tinto’s underlying full year earnings at $US11.75bn, with BHP half-year earnings likely to be about $US6.33bn and Fortescue at $US4.1bn.
And the bonanza is likely to continue for at least the next half, with iron ore prices still hovering around $US160 a tonne, and cash likely to keep rolling as China’s steel mills prepare to return from the New Year holiday season.
Macquarie analysts noted last week that China’s steel mills are anticipating strong demand when the holiday season ends and entered the New Year with inventories at lower levels than the same time in 2020. “Data from Mysteel showed today that stock sat 64 surveyed mills increased further to 19.8 million tonnes this week, but remain more than 2 million tonnes below the inventory level recorded just before CNY last year (22.2 million tonnes),” analysts said.
“Buoyant iron ore prices and positive leading indicators (such as relatively low port stocks and positive steel margins) underpin our bullish stance on iron-ore exposure.”
Fortescue shares closed Friday at $23.83, with Rio at $117.35, and BHP at $44.72.