Kumba Iron Ore on Tuesday reported a sharp drop in interim earnings, hurt by weak prices and a stronger rand, but introduced a targeted dividend ratio policy of 50 to 75 percent of headline earnings.
Investors across the mining sector have been hungry for dividends after years of depressed prices and low returns from a capital-intensive industry that requires long-term investment.
“The new dividend policy will target a base dividend range of between 50 percent and 75 percent of headline earnings,” Kumba, a unit of Anglo American, said in a statement.
“While we will prioritise shareholder returns in allocating capital, our aim is to maintain a flexible capital structure … as well as to ensure an appropriate level of capital is allocated to life extension projects.”
Kumba’s dividend yield is already high in relation to its peers at 10.65 percent compared with 3.95 percent for Johannesburg’s Mining Index.
The company posted headline earnings of almost 3 billion rand ($222 million) versus 4.6 billion rand in the first six months of last year while paying out a dividend of 14.51 rand per share compared to 15.91 rand last year.
(By Ed Stoddard and Vyas Mohan)
