Deterra share price flexes on FY22 dividend bonanza

Deterra is making dividend investors happy today!

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Key points

  • The Deterra Royalties share price is 0.2% ahead at $4.60 today 
  • Revenue and profits skyrocketed more than 80% in FY22 
  • Management has decided to pass the entire $178.5 million of profits to shareholders in dividends 

The Deterra Royalties Ltd (ASX: DRR) share price is inching ahead after revealing its full-year results.

As shares begin freely trading this morning, the mining royalties company's share price is up 0.2% to $4.60.

Deterra share price holds steady as royalties soar

  • Revenue up 83% year on year to $265.2 million
  • EBITDA up 90% to $256.8 million
  • EBITDA margin steady compared to FY21 at 97%
  • Net profit after tax (NPAT) up 89% to $178.5 million
  • Fully franked final dividend of 22.08 cents per share
  • Total full-year dividend of 33.76 cents per share, up 89%

In FY22, Deterra recorded an average realised iron ore price 14% below the prior year. Despite this, the company manifested a mighty improvement in royalty revenue.

According to the report, royalties were boosted by two main factors. Firstly, the cornerstone royalty asset, the Mining Area C (MAC), hit a record production volume of 111 million wet metric tonnes (mwmt), up 80% year on year. This meant more production to clip the ticket on for Deterra.

Secondly, the company received a one-off capacity payment of $46 million. The payment is related to the ramp-up of the South Flank expansion at MAC.

What else?

In the chair and CEO report, management pointed out their belief that the Deterra share price provides significant protection against cost inflation. This is due to the company having no exposure to the expenses associated with mining.

With significant dependence on BHP Group Ltd's (ASX: BHP) MAC operations, investors might be wondering about diversification. In FY22, Deterra did not make any new investments in royalty assets. However, management said it remains "very active" in seeking new opportunities.

What did management say?

Commenting on the result, Deterra managing director Julian Andrews said:

In particular, our cornerstone asset, the Mining Area C royalty, had an outstanding year, with MAC producing 111 mwmt, an increase of 80% on the prior year as the South Flank expansion continued its ramp up to full production.

Andrews added:

The expansion is now ahead of its schedule to increase overall MAC production to 145 mwmt per year by mid-2024 and BHP is to be credited for impressive execution of this US$3.6 billion capital project which will grow Mining Area C into the world's largest iron ore hub.

What's next?

Notably, shareholders are getting showered with the full profit proceeds of FY22. Shares will go ex-dividend on 25 August, making it an important date to remember for those wanting to receive the Deterra dividend. From there, the dividend will be paid on 21 September.

The company did not provide any specific forward guidance. However, management did highlight the potential future production from the South Flank expansion.

At completion, the operations are expected to hit 145 million wet tonnes per annum. This is forecast to occur by mid-2024, which would see a 30.6% increase in production from FY22.

Deterra share price snapshot

The Deterra Royalties share price has kept its head above water this year, unlike the S&P/ASX 200 Index (ASX: XJO). Specifically, shareholders have enjoyed a 5.05% return, far exceeding the 6.6% fall in the benchmark.

Finally, shares in the royalties company are now boasting a magnificent 7.4% dividend yield on a trailing 12-month basis.

Motley Fool contributor Mitchell Lawler 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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