Vale SA's Dividend Analysis
Assessing the Sustainability of Vale SA's Dividend Payments
Vale SA (NYSE:VALE) recently announced a dividend of $0.47 per share, payable on 2023-12-08, with the ex-dividend date set for 2023-11-22. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Vale SAs dividend performance and assess its sustainability.
What Does Vale SA Do?
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Vale is a large global miner and the world's largest producer of iron ore and pellets. In recent years the company has sold noncore assets such as its fertilizer, coal, and steel operations to concentrate on iron ore, nickel, and copper. Earnings are dominated by the bulk materials division, primarily iron ore and iron ore pellets. The base metals division is much smaller, consisting of nickel mines and smelters along with copper mines producing copper in concentrate. Vale has agreed to sell a minority 13% stake in its base metals business, which is expected to become effective early in 2024, and which is likely the first step in separating base metals and iron ore.
A Glimpse at Vale SA's Dividend History
Vale SA has maintained a consistent dividend payment record since 2002. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Vale SA's Dividend Yield and Growth
As of today, Vale SA currently has a 12-month trailing dividend yield of 4.65% and a 12-month forward dividend yield of 8.07%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Vale SA's annual dividend growth rate was 77.30%. Extended to a five-year horizon, this rate decreased to 54.70% per year. And over the past decade, Vale SA's annual dividends per share growth rate stands at an impressive 17.30%.
Based on Vale SA's dividend yield and five-year growth rate, the 5-year yield on cost of Vale SA stock as of today is approximately 41.20%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, Vale SA's dividend payout ratio is 0.38.
Vale SA's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Vale SA's profitability 8 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported net profit in 8 years out of the past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Vale SA's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Vale SA's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Vale SA's revenue has increased by approximately 19.20% per year on average, a rate that outperforms approximately 67.34% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Vale SA's earnings increased by approximately 42.30% per year on average, a rate that outperforms approximately 85.14% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 40.30%, which outperforms approximately 89.93% of global competitors, indicates strong earnings before interest, taxes, depreciation, and amortization.
Next Steps
In conclusion, Vale SA's upcoming dividend payment, robust dividend growth rate, manageable payout ratio, strong profitability, and solid growth metrics collectively suggest a promising outlook for dividend sustainability. Investors considering Vale SA for its dividend prospects have multiple reasons for optimism based on current performance indicators. As the company continues to focus on its core mining operations and strategic initiatives, it may offer a compelling opportunity for value investors seeking income-generating assets. Will Vale SA maintain its dividend growth trajectory in the coming years, and how will its strategic business decisions impact future payments? These are critical considerations for investors monitoring this mining giant.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
