Since then, Cutifani has overseen some significant changes at the firm, but even the most meticulous planning and the broadest commodity diversification will struggle in the face of plunging commodity prices across the piece- hence the even more aggressive cuts – it has increased its forecast capex reduction by $1bn, while its disposals target has been raised to $4bn, including its phosphates and niobium business – and, ultimately the recognition that the dividend is no longer sustainable.
Accordingly the firm has suspended its dividend for the second half of 2015 and the full year 2016, said: “upon resumption, policy will change to pay-out ratio to provide flexibility through the cycle and clarity for shareholders.”
It is for this reason that so many investors have shied away from the mining sector in recent years and, when they have invested, most have tended to prefer the likes of Rio Tinto and BHP Billiton, whose balance sheets look more robust.
But, while that has been the case, for dividend investors especially, there remain reasons to look across for lessons to learn from the plight of Anglo.
As Russ Mould, investment director at AJ Bell pointed out in a note out this morning: “Analyst forecasts suggest BHP Billiton will offer a yield of more than 10% for 2016 and Rio Tinto more than 7%. Both look to be at risk in the current commodity price environment, especially as BHP’s forecast 2016 profits provide dividend cover of just 0.4 times and Rio’s one times.”
Exactly where the sector goes next will in many respects depend on what happens with commodities prices but, there is a sense in the market that things are still likely to get worse before they get better.
