Brazil miner Vale pays bumper dividend, shares slide on iron ore fears
Brazil’s Vale SA (VALE3.SA) will pay 40.2 billion real ($7.6 billion) in first-half dividends, its largest payout since the miner’s 2019 dam collapse that killed almost 300 people.
Vale said in a securities filing released late on Thursday that its board had approved the distribution of 8.11 reais ($1.54) per share as dividends for the first-half of 2021, which would be paid on Sept. 30.
Although the dividend was above analysts’ estimates, it was not enough to offset negative sentiment from a drop in iron ore prices in China that hit mining companies across the board. Vale shares were down 2.5% in early trading at 85.76 reais.
UBS analysts downgraded the miner on Friday from “Buy” to “Sell,” citing lower forecasts for iron ore prices through 2023. In a note to clients, analysts said the lower prices would reduce earnings before interest, taxes, depreciation and amortization (EBITDA) per share between 13% and 17%.
In a note to clients, XP analysts said the payout was above expectations and meant a 9.2% dividend yield. XP estimates that Vale will pay $13.8 billion in dividends relative to 2021 earnings and rated the stock as buy.
Credit Suisse analysts also praised the dividend volume, saying it “reaffirms management’s commitment to providing substantial cash returns given low leverage.”
The miner added that its board had also approved the cancellation of 152,016,372 common shares acquired in previous buy-back programs and held in treasury.