Freeport-McMoRan Inc. (FCX, Financial) announced the details of the payment of its quarterly dividend on Sept. 26.
On Nov. 1, the copper mining company will pay five cents per ordinary share to its shareholders. In order to benefit, investors must be on the company’s record no later than Oct. 15. The ex-dividend date is scheduled for Oct. 12. If held constant, the quarterly distribution will lead to a forward annual dividend of 20 cents.
The payment is on par with the previous one. On the basis of the forward dividend yield, however, the stock is more interesting to investors today than it was two months ago.
On Wednesday, the stock fell 3.4%, adding to its losses that started in early July, pushing the forward dividend yield up to 1.43%. The share price was $14 at market close.
Following the depreciation, the forward dividend yield is now about 23 basis points higher than in early July. While it is still below the S&P 500 index's current dividend yield of 1.76%, it is one of the highest in the mining industry. If we consider that Newmont Mining Corp. (NEM, Financial) – the largest producer of gold and a member of the S&P 500 index – has a forward dividend yield of 1.87%, the yield of Freeport-McMoRan is still good. Newmont Mining is selling gold for $40 per gram, while Freeport-McMoRan is mainly selling copper, which is selling for less than one cent per gram.
The positive outlook for the copper market bodes well for Freeport-McMoRan. The global production of the commodity is predicted to grow over the next two years as a result of increased demand in the consumer electronics industry and rising urbanization in many Asian countries.Â
Among the producers of the red metal, Freeport-McMoRan will likely benefit the most since copper sales are its main source of revenue.Â
Wall Street is already predicting a 32% stock appreciation in the next 52 weeks.The average target price is $18.41 and one out of three analysts suggest increasing Freeport-McMoRan positions. The recommendation rating is 2.7 out of 5.
Freeport-McMoRan has operations in the Americas and Indonesia. One of its operations is the Lone Star Project in Arizona. Mineral studies are projecting an annual volume of 200 million pounds of copper over a 20-year mine life. The Lone Star Project is promising because most of the infrastructure is already there. This will, of course, lower the costs associated with building the asset. In addition, the company holds Grasberg, one of the largest copper and gold deposits in the world.
The improvement in the commodities market will also support the projects.
According to GuruFocus, Freeport-McMoRan has good fundamentals. The financial strength is rated 5 out of 10 and the profitability and growth is rated 6 out of 10. The company and its shareholders can rely on a trailing 12-month operating cash flow turnover of $5.5 billion. Of that, approximately 70% is used for growth and dividend payments.
Disclosure: I have no positions in any securities mentioned in this article.
