3 ASX dividend shares smashing records this reporting season

Investors hunting for dividend returns could do well to look at the big miners. Here are 3 ASX dividend shares smashing records this week.

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Reporting is wrapping up for the first half of FY21, and we have seen stellar results from some ASX dividend shares.

Investors hunting for dividends could do well to look at the big miners, which reported record dividends in their most recent results.

BHP Group Ltd (ASX: BHP) saw dividends increase by 55%, while Rio Tinto Limited (ASX: RIO) increased dividends by 26% and Fortescue Metals Group Limited (ASX: FMG) upped its interim dividend by 93%.

The miners benefited from strong demand for commodities, including iron ore, which is trading at record prices. Let's take a look at these ASX dividend shares in more detail. 

BHP Group

BHP announced record dividends this week as strong demand for iron ore helped the miner increase underlying net profit. The miner announced a record half-year dividend of US$1.01 per share. This represents an 85% payout ratio on an underlying basis and brings BHP's shareholder returns to more than $30 billion over the past three years.

Profit from operations was up 17% to US$9.8 billion thanks to strong underlying operational performance. The company achieved record iron ore production in Western Australia alongside copper extraction at the Escondida copper mine in Chile. Higher prices for both commodities contributed to strong free cash flow.  

Attributable profit was down by a fifth to US$3.8 billion due to an exceptional loss of US$2.2 billion. This predominantly related to impairments of New South Wales Energy Coal and associated deferred tax assets. Nonetheless, underlying basic earnings per share (EPS) increased by 16% to US119.4 cents a share.

Commenting on the half-year results, CEO Mike Henry said, "Our operations generated robust cash flows, return on capital employed increased to 24 per cent and our balance sheet remains strong with net debt at the bottom of our target range." 

BHP's outlook for global economic growth and commodity demand remains positive thanks to policymakers in key economies signalling an enduring commitment to growth. Combined with population growth and rising living standards, these factors are expected to drive continuing growth in demand for energy, metals, and fertilisers.

The company is also accelerating its plan to be lower cost and more productive. With a portfolio of essential products that will support a more prosperous world, BHP says it is well-positioned to generate sustainable returns for shareholders and value for its commodities. 

Rio Tinto

Rio Tinto joined BHP in the record dividend club by delivering the biggest dividend in its history. The continued strength in iron ore prices drove the miner to achieve its biggest profit in nine years.

Rio Tinto announced its full-year results this week for the year ended 31 December 2020. A total dividend of 557 US cents per share was declared, including a special dividend of 93 US cents per share. This represented a 72% full-year payout ratio.

Underlying earnings were US$12.4 billion, 20% above 2019. Net earnings were up 22% to US$9.7 million, reflecting $1.1 billion of impairments, most of which were taken in the first half of 2020. This compared to $1.7 billion of impairments in 2019. Underlying earnings per share rose 21% to 769.6 US cents per share. 

Rio Tinto ended the financial year with a strong balance sheet, including a $0.7 billion net debt, a decrease of $3 billion. This reflected the strength of free cash flow, partly offset by $6.3 billion of cash returns to shareholders in 2020.

"Safe and well-run operations, together with world-class assets, great people, capital discipline and a strong balance sheet, leave Rio Tinto well placed to generate superior returns for shareholders, invest in sustaining and growing our portfolio, and make a broader contribution to society," said chief executive Jakob Stausholm. 

Fortescue Metals 

Fortescue was another miner smashing dividend records this reporting season. On Thursday, Fortescue reported a record half-year performance with a 93% increase in interim dividends.

Commenting on the half-year results, Fortescue CEO Elizabeth Gains said: "Fortescue's performance for the first half of FY21 has been outstanding. Revenue of US$9.3 billion for the first half exceeded the prior comparable period by 44 per cent, with realised prices increasing by 42 per cent."

Shipments, earnings, and operating cash flow for 1H FY21 surpassed any half year in Fortescue's history. 

The metals giant reported net profit after tax (NPAT) of US$4.1 billion and earnings per share of US$1.33, an increase of 66% on the prior corresponding period. Net cash flow from operating activities was US$4.4 billion. Free cash flow was US$2.5 billion after investing $1.9 billion in capital expenditure.

The fully franked interim dividend of $1.47 per share represents an 80% payout of 1H FY21 NPAT. Fortescue has a commitment to shareholder returns targeting the top end of its dividend policy to pay out 80% of full-year NPAT. With 20% of NPAT available to fund future growth, the company intends to allocate 10% to fund renewable energy growth and 10% to fund other resource growth opportunities. 

Fortescue finished the half-year with net debt of US$110 million, including cash on hand of US$4 billion. The excellent operating performance in the first half combined with a continued focus on capacity optimisation has supported an increase in FY21 shipments guidance to 178–182mt. Full-year capital expenditure is expected to be in the upper end of the range of US$3 billion –US$3.4 billion.

Capital expenditure in the first half was US$1.9 billion, consisting of US$647 million in sustaining and operational development capital, US$58 million in exploration, and US$1.2 billion in major projects.

ASX dividend shares deliver 

ASX mining shares have been dividend stalwarts for some time now, but have outdone themselves this reporting season with record returns for shareholders.

The commodities boom is driving strong results for ASX miners, and many expect it to continue as the COVID-19 vaccine rolls out, which should result in a ramp-up in economic activity.   

Motley Fool contributor Kate O'Brien owns shares of BHP Billiton Limited and Rio Tinto Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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