Newmont May Double Its Dividend Payout in Third Quarter
New York, NY — Newmont Mining Corp (NYSE: NEM) may double its third-quarter dividend payout to $0.05 a share if the gold prices continue to trade higher, according to Chief Executive Officer Gary Goldberg.
“We’ll look at modifying our gold-price-linked dividend policy,” Goldberg told The Wall Street Journal in Sydney, noting that this modification will occur in the final quarter of the year. Meanwhile, if gold prices remain high, Newmont’s third-quarter payout could potentially double to $0.05 a share. (Source: “Newmont Sees Dividends Rising, Provided Gold Prices Cooperate,” Wall Street Journal, August 11, 2016).
Newmont will achieve that flexibility in its dividend payout policy after the world’s second-largest miner has successfully reduced its debt levels over the past three years to about $2.7 billion and gold prices continued their upward journey. Going forward, the dividend will be the company’s priority, the newspaper said, citing Goldberg.
Newmont last month declared a quarterly dividend of $0.025 per share of common stock as part of its gold price-linked dividend policy.
The policy recommends an annual dividend of $0.10 per share or $0.025 per quarter at a gold price of up to $1,300 per ounce and an annual dividend of $0.20 per share or $0.05 per quarter at a gold price between $1,300 and $1,399 per ounce.
For each $100 per ounce increase in the gold price above $1,399 per ounce, the annual payout increases at a rate of $0.20 per share or $0.05 per quarter. (Source: “Newmont Declares Quarterly Dividend of $0.025 Per Share,” Newmont, July 20, 2016).
Gold prices have surged about 25% in 2016, to about $1,340 a troy ounce. This level is much higher than the $1,100 an ounce that Newmont was forecasting for this year, according to Goldberg.
That rally in gold prices has helped Newmont shares to more than double in the past year to $45.77 on the New York Stock Exchange. The stock was up 0.5% today.
Citing a research note by Citigroup, the report said that Newmont is likely among the first North American gold miners that will increase its dividend payouts as its balance sheet improves faster than its global peers. (Source: Ibid).
Newmont’s net profit in the second quarter from continuing operations fell to $50.0 million, or $0.09 per share, compared to $63 million, or $0.13 per share, in the prior year quarter. However, it achieved adjusted net income of $231 million, or $0.44 per basic share, compared to $131 million, or $0.26 per share, in the year-ago quarter.
The second-quarter earnings also showed a strong cash flow situation, which is an indicator of the miner’s ability to return cash to its shareholders. It generated $780 million net cash from continuing operating activities and free cash flow of $486 million, compared to $441 million and $119 million in the prior-year quarter. (Source: “Newmont Announces Second Quarter Operating and Financial Results,” Newmont, July 20, 2016).