S&P/ASX 200 Index (ASX: XJO) coal shares were among the best performers last year. The dividend income is expected to flow this year. But, could shareholders keep getting big payments for years to come?
Coal prices jumped higher in 2022 after the Russian invasion of Ukraine as countries looked for alternative sources of energy.
Mining costs don't typically change much month to month, so when the resource price climbs it adds a lot to revenue but it can make the net profit after tax (NPAT) jump much higher.
While it seems obvious that the next result will show large profits and dividends, how long can this continue? The world can't just instantly conjure up another major energy source – it could take years.
Due to the current situation, ASX 200 coal shares could be cash machines until at least FY24.
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New Hope Corporation Limited (ASX: NHC)
New Hope is expected to keep benefiting substantially from coal earnings in FY24 according to the profit estimate on Commsec.
It could generate earnings per share (EPS) of $1.83 in the 2024 financial year and then pay an annual dividend per share of $1.32. This could translate into a grossed-up dividend yield of around 30%.
In fact, the FY25 grossed-up dividend yield could be 14% based on the current estimates.
But, remember that these are just estimates and things could be quite different in the future. Coal prices may not be quite as strong as analysts are expecting and therefore the dividends could be smaller. But, if coal prices outperform then the dividend could turn out to be bigger.
Whitehaven Coal Ltd (ASX: WHC)
Whitehaven is another ASX 200 coal share that has done very well out of these conditions with higher coal prices.
It's also expected to pay a very large dividend in FY23. But the good times could continue in FY24.
Commsec numbers suggest that Whitehaven may pay an annual dividend per share in FY24 of 91 cents. If that is paid, then Whitehaven's projected grossed-up dividend yield could be around 15%.
After that, in FY25, the early estimation is that Whitehaven could pay a grossed-up dividend yield of 11.5%.
Coronado Global Resources Inc (ASX: CRN)
Coronado Global is another ASX 200 coal share that is expected to pay very large dividends.
In FY23 it could pay an annual dividend per share of 35.7 cents, which translates into a dividend yield of 17.3%.
Profitability could reduce in the coming years, with a possible dividend yield of 11.5% in FY24.
Foolish takeaway
Even if coal earnings do drop off, it could still be strong enough for them to pay dividend yields of more than 10% in FY24. However, investors need to consider how much the share prices may reduce if the earnings fall.
