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.
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.