VALE:
$0.75 = expected forward yearly dividend
5.6% = yield with stock at $13.30
VALE, along with RIO and BBL(also trades as BHP), dominate the world's iron ore mining. These 3 also have the lowest cost of production, and untapped reserves to continue that indefinitely. Therefore, these 3 will be steadily taking market share from higher-cost Chinese and North American mines. That market-share gain will accelerate the lower ore prices go.
With the general downturn in miners (iron ore, copper, gold, silver, etc.) stocks are down. In addition, emerging market stocks are down (VALE mines in Brazil; RIO and BBL in Australia). And Brazil is in the midst of political turmoil. Combine that with general market fears due to the end of QE3, and VALE has fallen from its 2011 high of $33, to $13.30 today. On all valuation metrics, it is at the extreme low end of its LT range.
dividend/share yearly in US$:
2013 0.75 expected
2012 1.15
2011 1.76
2010 0.57
2009 0.52
Like most non-U.S. companies, dividends change with profits. Since 2009 was an unusually bad year for the industry, and 2011-12 unusually good, future dividends will probably be in that range. Any LT growth in the market, or any market share gains, would move both ends of the range up. But it's a cyclical industry, so don't expect steady dividends.
debt/equity:
VALE 42%
RIO 46%
BBL 52%
For this industry these debt/equity ratios are normal. As a low-cost producer, they will survive any industry downturn. As a former government-owned company, they aren't at risk from resource nationalism.
disclosure: I took a small position today, which may become a LT holding. |
