A 55% hike in BHP’s first-half dividend and the restoration of payments to shareholders at Glencore are putting welcome cash back into the kitty for investors in the UK stock market, says Russ Mould, AJ Bell Investment Director.
The miners’ dividends will help to fill the large hole left by BP and Shell in particular and increases from the diggers underpin consensus forecasts for an increase in total FTSE 100 dividends for 2021 of one sixth.”
With Rio Tinto also expected to unveil a healthy increase in its full-year dividend for 2020, the miners look set to become the largest contributing industrial sector to the FTSE 100’s overall pay-out in 2021, according to analysts’ forecasts.
“Anglo American, Antofagasta, BHP, Evraz, Fresnillo, Glencore, Polymetal and Rio Tinto are now expected to pay dividends worth £13.5 billion in calendar 2021. That is a record high for the sector and represents 18% of the FTSE 100’s forecast £74 billion total, the highest percentage contribution to the index’s overall pay-out from the mining sector.
“As metal prices stay firm, capital investment plans are kept disciplined and mega-mergers seem off the menu, the miners continue to generate cash and keep their debts firmly under control (Rio Tinto is even forecast to have a net cash balance sheet in 2022). This provides plenty of scope for generous dividends and as Government bond yields creep higher, central banks keep ladling out monetary stimulus and Governments continue to pile on fiscal stimulus markets are wondering whether the next big story is the return of inflation. If so, miners could be a good place to be, as during inflationary periods – when paper money effectively loses a chunk of is purchasing power – then ‘real’ assets such as commodities are often seen by investors are some form of protection against this.