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Aug. 19, 2015, 11:59 a.m. EDT

Rout in commodities eats into miners’ dividends

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By Carla Mozee, MarketWatch

The rout in commodities isn't only taking a toll on shares of mining companies, it is also driving dividends issued by miners sharply lower.

Aggregate dividends from large precious metals miners are set to drop to $1.8 billion this year, more than 60% below the $4.9 billion in payments made in 2011, according to dividend forecasting data compiled by Markit that was released this week.

The reduction comes as prices for metals have been mauled, in part by worries that a slowdown in the Chinese economy will dampen demand for natural resources. The surprise devaluation of the yuan /zigman2/quotes/210561991/realtime/sampled USDCNY +0.1547%  last week by Chinese officials spurred concerns the currency move will hurt imports of metals.

Palladium  futures are leading the pack in the slide among metals, as futures have tumbled more than 24% this year, according to FactSet data tracking most-active contracts. Platinum  has lost about 17% and gold futures  are down nearly 5% year-to-date.

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Copper futures, meanwhile, have declined about 20% in 2015 while silver’s loss has been relatively more subdued, down around 2.5%.

Barrick Gold Corp. /zigman2/quotes/209252292/delayed CA:ABX +4.83%   is among the companies that is expected to see dividends fall this year. Markit foresees a 30% decline for the current, unreported fiscal year from the year-earlier period, “compounding previous dividends cuts which saw payments fall by a third on previous levels,” the data firm said.

Barrick earlier this month slashed its quarterly dividend by 60% , to 2 cents a share from 5 cents a share, a move “to increase financial flexibility in light of current market conditions,” the company said in a statement. The Toronto-based miner’s shares have lost 18% this year, and 50% over the past 12 months.

Also among Markit’s expectations, it sees year-over-year dividend declines of 70% from Alamos Gold Inc. /zigman2/quotes/201596583/delayed CA:AGI +2.45% , of 60% at Pan American Silver Corp.  and of 25% at Goldcorp Inc. /zigman2/quotes/225792379/delayed CA:G +1.52% .

But improvement appears to be on the horizon for payouts. Aggregate dividends are expected to rise by 25% in 2016 to $2.3 billion, “as cost cutting, capital expenditure and restructuring efforts start to affect firms cash flows after four years of sustained lower metal prices,” said Markit.

US : Tullett Prebon
+0.0109 +0.1547%
Volume: 0.0000
Dec. 1, 2022 10:05p
CA : Canada: Toronto
$ 23.01
+1.06 +4.83%
Volume: 9.11M
Dec. 1, 2022 4:00p
P/E Ratio
Dividend Yield
Market Cap
$38.87 billion
Rev. per Employee
CA : Canada: Toronto
$ 13.36
+0.32 +2.45%
Volume: 755,580
Dec. 1, 2022 4:00p
P/E Ratio
Dividend Yield
Market Cap
$5.12 billion
Rev. per Employee
CA : Canada: Toronto
$ 2.01
+0.03 +1.52%
Volume: 71,760
Dec. 1, 2022 3:42p
P/E Ratio
Dividend Yield
Market Cap
$156.83 million
Rev. per Employee

Carla Mozée is a reporter for MarketWatch, based in London. Follow her on Twitter @MWMozee.

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