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Whitehaven Coal Ltd shares jump on bumper profit result and distribution plans

The Whitehaven Coal Ltd (ASX: WHC) share price has been a big mover in early trade.

At the time of writing the coal miner’s shares are up 6% to $3.56 following the release of its full-year results.

Here are key takeaways:

  • Revenue increased 52.3% to $1,773.2 million.
  • Operating EBITDA before significant items of $714.2 million, up 219%.
  • Net profit after tax up 1878% to $405.4 million.
  • Diluted earnings per share 40.7 cents.
  • Coal production and sales of 23.1Mt and 20.7Mt, 13% and 3% higher respectively than FY 2016.
  • Net debt reduced to $311.1 million with gearing at 9%.
  • Proposed distribution of 20 cents per share.

It certainly has been an impressive turnaround for the leading coal miner and it isn’t hard to see why Whitehaven’s share price is up 70% in the last 12 months.

Perhaps best of all is that management has taken this opportunity to pay down debt considerably and reward shareholders with a 20 cents per share distribution.

This will comprise a 14 cent capital return and a 6 cent unfranked dividend. At the current share price this equates to a yield of 5.6%.

Which is actually better than what’s on offer at Telstra Corporation Ltd (ASX: TLS) following its decision to cut its dividend in FY 2018.

Should you invest?

Whilst I think Whitehaven is in great shape and its FY 2018 guidance is solid, whether or not an investment is successful will depend on where coal prices go next.

Prices have come under pressure in recent weeks and should this weakness persist, then Whitehaven may struggle to better this result next year.

In light of this, I would suggest investors only snap up shares if they are confident that coal prices will move higher later this year and into 2018.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.