New Hope Corporation Ltd (ASX: NHC) shares are $4.57 apiece, down 1.51% at the time of writing.
This ASX 200 coal stock has dished out some pretty impressive dividends in recent years, delivering a welcome passive income boost to income investors.
But can it continue? We investigate.
A passive income bonanza from New Hope shares
New Hope is a thermal coal miner with associated coal port, oil and gas, and agricultural operations.
New Hope dividends surged in recent years amid record-high coal prices as a result of the Russia-Ukraine war. The thermal coal price rocketed to an all-time peak of US$457.80 in September 2022.
By comparison, today it sits at US$133.75 per tonne, and that's still strong by historical standards.
That price rocket led to a complete reset of New Hope dividends, which soared from a fully franked annual payment of 11 cents per share in 2021 to a whopping 86 cents per share fully franked in 2022.
Special dividends boosted the payout in 2022. And during this passive income bonanza, New Hope shares surged to a record-high share price of nearly $7 in October 2022.
Last year, there were more special dividends. The coal mining stock paid a total of 70 cents per share, fully franked, over the course of the year.
So, what now?
Well, the thermal coal price retreated dramatically last year to bottom out around today's levels by June.
Looking ahead, the forecasts for commodity prices published by the Department of Resources show an expected average thermal coal price of US$135 per tonne for FY24, down from US$302 per tonne in FY23.
What do you reckon that has done to New Hope's earnings and dividend prospects?
What will the New Hope dividend be in 2024?
The consensus analyst forecast published on CommSec is for New Hope shares to pay 34.9 cents per share in dividends this year. That's half the amount paid in 2023.
The stock went ex-dividend on its interim dividend payment of 17 cents per share yesterday.
For the six months ended 31 January, New Hope reported a 45.9% decline in revenue and a 59% reduction in earnings before interest, taxes, depreciation, and amortisation (EBITDA).
This was driven by a 58% fall in the average realised coal price to $197 per tonne, among other things.
The outlook is not too inspiring.
The analysts expect a minor drop in dividends to 33 cents per share in 2025 and then 27 cents in 2026.
So, what kind of yields are we talking now?
Well, despite the big drop in anticipated dividends by dollar amount, the yields are still comparatively good. The ASX 200 typically delivers a yield of 4% and New Hope shares are set to pay above that.
Let's do the dividend yield calculations.
A $10,000 budget (minus a brokerage fee of $5) will buy you 2,187 New Hope shares at the current price.
Total spend = $9,994.59.
If we multiply 2,187 shares by 34.9 cents, we get a total annual dividend amount of $763.26. That's a dividend yield of 7.6% for 2024.
In 2025, the dividend payment is anticipated to be $721.70. That's a dividend yield of 7.2%.
In 2026, the dividend payment is expected to be $590.49. That's a dividend yield of 5.9%.
And then you add the franking credits on top!
Should you buy New Hope shares?
Goldman Sachs has a sell rating on New Hope shares with a 12-month price target of $3.50.
This implies a potential downside of 23% for investors who buy the coal mining stock today.
Morgans has a hold rating and a $4.80 price target, while Ord Minnett also says hold but with a loftier price target of $5.90.
The consensus rating among analysts on CommSec is a hold, upgraded from moderate sell on 2 April.
