These 2 ASX mining stocks have had a rough time. Yancoal Australia Ltd (ASX: YAL) and New Hope Corporation Ltd (ASX: NHC) saw their share prices tumble over the past 12 months, falling 13% and 16% respectively.
However, these bruised ASX coal stocks get exceptional marks for their dividend yields.
Most income investors automatically reach for the usual suspects: banks, telcos, maybe a bit of infrastructure. But right now, those 2 ASX mining stocks are flexing a dividend yield that leaves the rest in the dust.
Let's have a closer look.
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Yancoal Australia Ltd (ASX: YAL)
We'll start with the bigger of the two ASX mining stocks, $6.8 billion Yancoal Australia. The company, majority-owned by the Chinese Yankuan Energy Group, is one of Australia's largest coal producers. It has mines across NSW, Queensland and WA.
At today's prices, Yancoal currently sits at the top of the ASX 200 dividend yield table. With shares hovering around $5.20 at the time of writing, Yancoal has been showering shareholders with cash.
The result? A trailing dividend yield in double-digit territory. The ASX mining stock is paying an exceptional 11.1% dividend, fully franked – comfortably ahead of the big banks, telcos, and even energy heavyweights.
Yancoal's dividend policy is designed to be generous, but not reckless. Under its framework, the company aims to return the higher of 50% of net profit or 50% of free cash flow to shareholders. However, this isn't set in stone. The board retains full discretion and can dial things back if circumstances demand it.
The high dividend yield will appeal to income investors, but it comes with volatility. Dividends are closely tied to coal prices and are unlikely to stay this high.
Analysts are generally upbeat on the ASX mining stock. The average 12-months price target is set at $5.95, which implies a potential 14% upside compared to the current share price. This could bring total returns for the year to 25%.
New Hope Corporation Ltd (ASX: NHC)
ASX mining stock New Hope Corporation has been dragged lower by a sharp slump in global coal prices. Still, New Hope is waving a juicy carrot in front of income investors.
At the current share price of $4.07, it's serving up an eye-catching dividend yield of roughly 8.5% fully franked.
Tempting stuff — but is it a bargain, or just hazard pay for riding the coal cycle?
On the operations front, New Hope isn't standing still. The ASX mining stock is a seasoned Australian coal producer, anchored by Bengalla in NSW and New Acland in Queensland.
Management also continues to talk up low-cost operations, diversification and disciplined execution, even as pricing cools.
Dividends are doing the heavy lifting though. A dividend reinvestment plan is now live, and management says dividends remain the main return lever. Shareholders pocketed 34 cents fully franked over the year, helping soften the blow from recent capital losses.
As for brokers? Mixed vibes. Some see upside above $4.50 if coal prices rebound. Most, however, sit on the fence. Macquarie's gone full cold shower, downgrading the stock and warning prices could still fall further.
