The S&P/ASX 200 Index (ASX: XJO) has struggled this year, falling 10% year to date, but one sector has been outperforming. The S&P/ASX 200 Energy Index (ASX: XEJ) has gained a whopping 34% in 2022, partially bolstered by surging coal prices. And the party's not over yet for shares in ASX 200 metallurgical coal producer Coronado Global Resources Inc (ASX: CRN), according to one expert.
The stock has gained close to 43% year to date to trade at $1.84 right now.
It also boasts a monumental dividend yield of 21.5%, having paid its Aussie investors a total of approximately 39.6 cents in dividends this year.
Most of that has originated from the company's free cash flows, which have surged amid high coal prices and demand for the commodity.
Indeed, discounting the only offering not born from free cash flows – an 8.25 cent special dividend offered on the back of a notes offering – the company would still be trading with a 17% yield.
But are its sky-high payouts doomed to come to an end? Let's take a look.
Can this ASX 200 share sustain its 21% dividend yield?
The share price of Coronado Global Resources has soared this year alongside the company's earnings.
It posted close to US$2 billion of revenue for the first half of 2022 – up 147% year-on-year. Its adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) also rocketed 3,204% to US$849 million.
Topping it off, the company boasted $423 million of free cash flow, allowing it to pay a 10.8 cent interim dividend in September.
Looking further back, the stock paid investors a 12.2 cent final dividend for 2021 in April. In-between those two offerings, it handed shareholders two special dividends, worth a combined total of 16.6 cents.
And with the company planning to pay out between 60% and 100% of free cash flow in the form of dividends in the future, one expert is bullish.
Tribeca Investment Partners portfolio manager Todd Warren has tipped Coronado Global Resources shares as a buy, saying courtesy of Livewire:
[It has] a very strong balance sheet, net cash, generating huge amounts of free cash.
They're exposed to both thermal coal and met coal, which gives them a little bit of a hedge against one market or the other. They're also hedged in terms of their geographic location, and I think actually where we might see some near-term upside … is their met coal exposure out of the US, which is priced on long-term contracts.
On that note, the fundie has tipped the company's dividend yield to actually increase in the near future. Warren said:
[Higher yields are] a function of the huge free cash they're going to continue to generate.
What do other experts tip for Coronado Global Resources shares?
But not all are so bullish on the ASX 200 shares' future.
Goldman Sachs, for instance, has a buy rating on Coronado Global Resources' shares, but a price target of just $1.85. That means the broker isn't expecting the stock to gain much from here.
Though, it does tip the company's free cash flow to surpass US$700 million in the December half amid continuing risks surrounding Russian coal. That could spell good news for future dividends.
Meanwhile, Monash Investors co-founder and director Simon Shields believes the stock is a hold, telling Livewire "I just can't get the same sort of handle on [the coal price] as I can for the oil price."
