Do any ASX lithium stocks pay dividends?

Do any ASX lithium stocks actually pay out dividends in 2022?

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Key points

  • Lithium has been hot with investors over the last few years, but are they also seeing dividends from their investment in lithium?
  • For a company to pay a dividend it must first develop consistent cash flow, and most of the companies in the ASX lithium space are yet to achieve this
  • There is one exception, an ASX lithium share that has historically paid a dividend

You’d have to be living under a rock of some description if you hadn’t noticed the attention that ASX lithium stocks have been getting from investors in recent months and years. Lithium has been one of the hottest areas investors have been looking at on the markets over 2021 and 2022. You only have to look at the share prices of ASX lithium stocks like Pilbara Minerals Ltd (ASX: PLS) to see why.

Back in late 2020, Pilbara was a company with a share price under $1. Fast forward to January of this year and we were seeing Pilbara shares close to $4 each. The company has cooled off since then, closing today at $2.60. We’ve seen similar patterns emerge for other companies in the lithium space, such as Core Lithium Ltd (ASX: CXO) and AVZ Minerals Ltd (ASX: AVZ). But this still proves how much attention (and cash) ASX lithium stocks like Pilbara and its peers have gotten in recent times.

As you might guess, excitement about the global transition to electric vehicles and renewable energy, as well as emerging battery technology, are likely behind this increase in interest. But buying lithium stocks is an investment in a business at the end of the day. And ASX investors still have expectations when it comes to their ASX businesses. One of these is dividend income.

Most ASX shares pay dividends of some sort. That is arguably because ASX investors expect to receive dividend income (as well as franking credits) from their shares.

Do ASX lithium stocks pay dividends?

So how do ASX lithium stocks hold up in this regard?

Not well, to sum it up. For a company to pay a dividend, usually it must first develop strong, consistent cash flows. And most of the companies in the ASX lithium space are yet to achieve such a milestone. Many are not yet even consistently profitable. That’s why Core Lithium and AVZ Minerals don’t even have price-to-earnings (P/E) ratios yet. There are no earnings to speak of.

There is one exception though. Mineral Resources Limited (ASX: MIN) is not a pure-play lithium company. It has interests in a wide range of commodities and projects. However, one of those is lithium. Mineral Resources owns two hard rock lithium mines in Western Australia.

This company is also a historical dividend payer. Mineral Resources has doled out two dividends per year for over a decade. That included through 2020. Saying that, the company did skip an interim dividend in 2022, citing “volatile conditions in the iron ore market”. That was the first time it has missed a dividend in over a decade. So even with this sole dividend payer in the lithium space, income can’t be guaranteed.

So if an ASX investor is seeking regular dividend income, perhaps ASX lithium stocks might not be the best place to look.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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 Scott Phillips.

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