In early January I wrote about how I believe Australia’s big mining stocks could well become the next batch of go-to companies for income-seeking investors. Now that the companies I mentioned have all reported their results to 31 December 2013, it seems like an appropriate time to gauge how they’re travelling.
BHP Billion Limited (ASX: BHP)
BHP reported an unexpectedly strong 30.6% increase in net profit and a 5.9% lift in revenue compared to the previous corresponding period. BHP’s chief executive officer Andrew Mackenzie noted that capital management initiatives had reduced the company’s debt load to around $27 billion and that come June 2014 he would consider ways of returning funds to investors via a share buy-back or increased dividend payout ratio.
BHP announced a dividend payout for the half of 59 cents per share, up from 56 cents last year. This should put BHP on a dividend yield of around 3.3% at the current price, or 4.7% grossed up.
Rio Tinto Limited (ASX: RIO)
Rio reported earlier in February and smashed estimates out of the park with a 10% increase in underlying profit and a 15% jump in dividend payout. Rio announced that the full-year dividend would be US$1.92 to bring its yield up to 3.3%, the same as BHP’s, which at 100% franking, results in a 4.7% yield grossed up. Morningstar predicts the payout will jump by another 20% next year.
Woodside Petroleum Limited (ASX: WPL)
In contrast to its peers, Woodside’s result was somewhat underwhelming: net profit fell 41% as a result of asset sales in the previous year, while the company also realised a lower price for sold gas and wrote-down the value of ageing assets. Revenue also fell 6.6%, which is disappointing, however free cashflow of over US$2 billion and a 20% reduction in debt to a gearing level of just 9% were positives. A nice positive for shareholders though was a boost in the full-year dividend to US$2.49, which represents a yield of 6.5% fully franked, or 9.3% grossed up.
Fortescue Metals Group Limited (ASX: FMG)
The final miner to report was Fortescue, who released results on Wednesday. Profit was up 259%, revenue was up 77% and cashflows from operations were US$3.6 billion for the half. These remarkably good results came as a result of strong iron ore prices and allowed the company to pay a 10 cents per share interim dividend. Morningstar expects a similar final dividend to be paid, which would result in a 3.4% yield, grossed up to 4.9%.
As noted in January, these big mining companies could become go-to stocks for dividend lovers. Rio, BHP and Fortescue are all showing good volume growth while paying down debt in order to payout a greater proportion of earnings in the future as dividends. Woodside is a little way ahead of them and is paying an extremely respectable yield, however it appears as though growth avenues may be limited.