Stifel: Scale of likely BlackRock World Mining dividend cut could ‘unsettle’ income investors

Yield would still be an estimated 6% despite a potential 43% cut to its final dividend, compared to 2022


Stifel analysts have warned that income investors may be unsettled at the scale of a possible dividend cut at the £996m BlackRock World Mining (BRWM) investment trust.

In a research note published this morning (6 February), Stifel acknowledged that mining company dividends are volatile and this would likely impact the dividend paid by BRWM.

While BRWM does not disclose a dividend forecast, analysts estimated a final 2023 dividend to be between 13.5p and 15p per share, a potential cut of between 36% to 43%. The trust paid out 23.5p as a final dividend the year before.

See also: The Lang Cat: Advised platforms suffer record outflows in 2023

The trust has paid out three interim dividends of 5.5p each in 2023. A final payment of between 13.5p and 15p would result in a 30p-31.5p final dividend, a drop from the 40p paid out in 2022.

In November, Janus Henderson’s Global Dividend Index for Q3 2023 highlighted falling payouts from mining companies in particular as a key contributor to a 0.9% decline in global dividends.

Analysts said: “While we think investors may be anticipating a cut following the dividend reductions at the mining companies, there may be some surprise at the scale of this, if our assumptions are correct.

“This may unsettle income investors; however, the dividend yield would still be relatively high at c.6% post our forecast cut.

“We maintain a neutral recommendation on the shares, as we do not see any immediate catalyst for a positive discount re-rating at this point.”

The trust currently trades at a 4.7% discount, according to the Association of Investment Companies.

Stifel maintained BRWM’s ‘Neutral’ rating.

The analysts added: “There appears to have been reasonable demand for the shares in the market, despite the relatively weak performance of mining companies and NAV decline – down 6.2% in 2023. We think BRWM’s high yield will be a factor behind some of this demand and a lower 2023 dividend may make the shares less attractive to income investors.

“However, even if the dividend cut is as we expect, the yield will still be high at approximately 6% – so many income investors may stay on for the ride.”

BRWM has been contacted for comment.

See also: Will inflation fall enough for ‘year of the bond’?