I want I had higher information for Southern Copper (NYSE: SCCO) traders who get pleasure from their huge dividend funds. However these traders have already been skilled by the corporate’s administration to not anticipate to proceed to obtain those self same massive dividends 12 months after 12 months.
There are two major issues, and free money movement is considered one of them.
After regular development for the previous few years, free money movement on the mining firm is projected to get lower in half this 12 months, falling to $1.7 billion from $3.4 billion in 2021. Subsequent 12 months, free money movement is forecast to be flat, at $1.7 billion once more.
Declining free money movement is a matter, however it will get much more severe when it now not covers the dividend.
In 2021, Southern Copper paid out $2.5 billion in dividends, or 74% of the corporate’s free money movement. I search for a payout ratio of 75% or decrease, so it was on the higher restrict of what I wish to see.
This 12 months, nevertheless, the payout ratio is projected to be 165%. So for each $1 of free money movement, the corporate is paying out $1.65.
That’s not sustainable. And administration is aware of this.
The corporate already slashed the dividend in August to $0.75 per share from $1.25. In actual fact, Southern Copper has lower the dividend six occasions since 2013.
The present $0.75 per share dividend comes out to $2.3 billion in payouts annualized. If free money movement doesn’t enhance shortly in 2023, one other dividend lower may be very probably.
Dividend Security Ranking: F
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Good investing,
Marc
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