Miners could follow Anglo American dividend cut
Shares in Anglo American fell by as much as 8% in early trading today after the firm announced it was suspending its dividend to investors as part of cost savings plans as it deals with weakening commodity prices.
The news drove down share prices of fellow miners Glencore, Antofagasta, Rio Tinto and BHP Billiton.
Joshua Mahony, market analyst at IG, said: “The attractiveness of owning oil or mining shares has been questionable of late and with the prospect of dividends also being scrapped, the sector is fast running out of reasons to invest.
“The sell-off seen across FTSE commodities stocks highlights the flock to dividend safety with Anglo American likely to be the first of many firms sacrificing its dividend.”
Sharing his view, Russ Mould, investment director at AJ Bell, added: “A plunge in the Bloomberg Commodity index to a sixteen-year low helps to explain Anglo American’s decision today to cancel any dividend payments in 2016, a move which in turn piles the pressure on BHP Billiton and Rio Tinto to reassess their shareholder payouts.
“Analyst forecasts suggest BHP Billiton will offer a yield of more than 10% for 2016 and Rio Tinto more than 7%. Both look to be at risk in the current commodity price environment, especially as BHP’s forecast 2016 profits provide dividend cover of just 0.4 times and Rio’s one times.
Meanwhile, Mahony said evidence of the relative stability of the US jobs market has been highlighted once more today, with the US JOLTS report indicating that job openings, hires and separations were largely stable.
He said: “The JOLTS report is rumoured to be Janet Yellen’s favourite labour market measure and with such stability confirming a robust jobs report last week, a December rate rise seems more likely than ever.”