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Dividend Reinstatement: ArcelorMittal Will Take Baby Steps

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Nov. 20 2020, Updated 4:48 p.m. ET

Dividend reinstatement

ArcelorMittal (MT) posted free cash flows of $1.85 billion in 4Q17. Due to improved steel prices (X) (AKS), steel companies’ cash flow generation capacity also improved. Now, with steel markets showing signs of stabilization, investors have also started vouching for dividends (SDY). Several metal and mining companies (GLEN-L) have taken steps to reinstate or increase their dividends, which were shelved in 2015.

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ArcelorMittal’s dividend

ArcelorMittal suspended its dividend program in 2015 in response to tough market conditions. However, life has come full circle for metal and mining companies in the past two years. Not only have companies managed to bring down their debt levels, their earnings and cash flows have also improved.

Previously, ArcelorMittal’s management noted that the board would reconsider the dividend policy when the company’s net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) falls below two. However, during the 4Q17 earnings release, the company said that it “will continue to prioritize deleveraging and believes that $6 billion is an appropriate net debt target that will sustain investment grade metrics even at the low point of the cycle.” At the end of 4Q17, ArcelorMittal had a net debt of $10.1 billion.

2018 outlook

Meanwhile, ArcelorMittal looks on track to reinstate its dividend this year. According to the company, “The Board has agreed on a new dividend policy which will be proposed to shareholders at the Annual General Meeting (AGM) in May 2018. Given the current deleveraging bias, dividends will begin at $0.10/share in 2018.” ArcelorMittal would start paying dividends as a percentage of its free cash flows once it achieves its net debt target.

You can visit Market Realist’s Metals and Mining page for ongoing updates on the industry.

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