Our love for dividends has not waned and even a dim outlook for coal and oil were not enough to put off investors as New Hope Corporation Limited (ASX: NHC) discovered.
The coal and oil producer jumped 5.6% to $1.70 in morning trade even as management turned in a net loss of $21.8 million for the year ended July 31, 2015, compared to a net profit of $58.5 million in the previous year.
The outlook isn't particularly rosy given that the thermal coal and oil prices have more than halved and the latest result marks the fourth consecutive year of declining net profits for New Hope.
But management is feeling confident enough to pay a special dividend of 3.5 cents a share on top of its fully franked final dividend of 2.5 cents a share. This takes the company's full year dividend to a generous 10 cents a share.
Investors were also pleased that its underlying net profit actually jumped by a quarter to $51.7 million due to aggressive cost cutting, which lowered its cost of sales by 17.1%.
The underlying profit excludes impairments and other "non-regular" items that shaved $73.6 million off its bottom line.
But this big write-off doesn't affect New Hope's cash position. If anything, the company is luckier than most of its peers as it has $1.1 billion in cash it can put to work.
Its chief executive Shane Stephan said he is keen on capitalising on the depressed market to make acquisitions in coal and New Hope is believed to have been sniffing around Rio Tinto Limited's (ASX: RIO) coal assets.
A number of the mining majors are selling "non-core" assets like coal and there probably aren't many interested buyers around due to the low confidence many have about the future of the resource.
This is a buyer's market and New Hope is probably one of the best positioned local players to take advantage of the situation. Rivals like WHITEHAVEN COAL LIMITED (ASX: WHC) have only around $100 million in cash.
Thermal coal is trading around $US56 a tonne compared with $S150 a tonne in 2011, while the Brent oil price has shed over 60% over the same period to under $US49 a barrel.
New Hope has offset some of oil's weakness by ramping up production to 158,883 barrels in 2014-15, or 36% more than the previous year.
The company probably has enough financial muscle to wait out the downturn in these commodities but I think there will be a better entry opportunity down the track.
I prefer more diversified miners like BHP Billiton Limited (ASX: BHP) or even its spin-off South32 Ltd (ASX: S32).
