“Aggressive and sustainable” dividend policy
Vale SA (VALE) has guided for an “aggressive and sustainable” dividend policy going forward. The company is planning to come up with a new dividend policy by the end of March 2018. It will most likely link shareholders’ remuneration to cash generation, which would apply to any commodity price scenario. The new dividend policy is expected to be more robust, predictable, and sustainable.
Reduction in debt to enable dividends
The company also mentioned that the reduction in net debt is an enabler to adopt an aggressive dividend policy. During its investor day in December 2017, the company referred to the difference between cash flow generated and the amount required to lower net debt to $10 billion as “accumulated dividends.” Vale’s CFO, Luciano Siani Pires, said that Vale would distribute every penny beyond what’s required to take that down to $10 billion.
In the face of falling commodity prices, miners Freeport-McMoRan (FCX), Glencore (GLNCY), and Anglo American (AAUKY) had suspended their dividends (DVY). However, they’ve started reinstating and increasing their dividends recently. BHP Billiton (BHP), for example, boosted its dividends in its latest results.