Market Report: Miners plumb the depths on dividend fears

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Investors were in no mood to dip their toes into stocks whose dividends could be under threat as they offloaded shares in heavyweight miners.

Rio Tinto fell 22p to 1621.5p and BHP Billiton dropped 9p to 606p ahead of their respective operational updates tonight and tomorrow night.

The Anglo-Aussie iron ore giants, which have in the past been linked with a tie-up, are among hardest hit by China’s heavy landing and the subsequent fall from industrial metals prices which has hammered profits.

At present, BHP is forecast to be the highest-yielding stock on the FTSE 100 with a huge payback for investors of 11.4%.

Rio Tinto is not far behind at 8.4%. Both balance sheets are stretched but it is BHP’s dividend cover at just 0.4 times earnings, that is the biggest concern prompting Russ Mould, investment director at AJ Bell, to speculate that a divi cut for this year “looks a strong possibility”.

Conversely, Old Mutual, the best covered of one the Footsie’s highest-yielding stocks at 2.1 times earnings, rose 1.3p to 153p.

Otherwise, buyers were few and far between as investors were not inclined to stake large sums on unstable markets.

The winners in a volatile stock market — the FTSE 100 edged up just 3.75 points to 5807.85 following another roller-coaster week — appear to be those picking the losers.

Short-sellers of Ocado (those selling borrowed shares and then buying them back at a lower price for a profit) have made a killing from the online supermarket’s decline.

Shares in the company, which has overtaken Sainsbury’s and Morrisons to become the second-most-shorted share on the LSE after Carillion, fell a further 9p to 245.6p today, taking the 2016 share price fall to 19%.


Wobble: Brick maker Ibstock (Picture: Reuters)

Brick maker Ibstock, a solid bet since October’s float, retreated 4.63p to 215.37p after meeting annual profit targets, with revenues up 9% last year.

On the junior market, Roman Abramovich-backed AFC Energy, one of last year’s best performers, shrugged off torrid markets to raise £3.6 million through a placing and subscription which were almost four times oversubscribed. The fuel-cell firm powered up 1.75p to 26p.

MX Oil fell 0.06p to 0.92p as it confirmed plans to raise cash, adding that it has received offers for its assets in Nigeria, and Empyrean Energy gushed 2.63p, or 50%, higher to 7.6p after managing to sell its 3% stake in the Marathon Oil-operated Sugarloaf project in Texas for up to $71.5 million (£50 million) — almost five times Empyrean’s entire market value.

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January 19, 2016 |
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