2017 has been a great year in the mining sector generated by significantly better commodity prices. The recovery which began in late 2016 continued into the first half of 2017, amid the growth in the global economy.
Major companies like Rio Tinto (LON:RIO) and Glencore (LON:GLEN) have showed good results over the period of two years, with stocks rising 120 percent and 421 percent respectively.
Investors who bought stocks during the dark period of low commodity prices in 2015 are now enjoying good returns. Rio Tinto’s last report announced total cash returns to shareholders with respect to 2017 first half stand at $3.0 billion. Dividends paid to equity shareholders were $ 2,248 million in 2017 compared to $ 1,916 million in 2016.
Glencore on the other hand, reported the first tranche of the 2016 distribution of $0.035 per ordinary share amounting to $499 million was paid in 31 May 2017. A second payment of $500 million in September comprised the company’s commitment to return $1 billion to shareholders in 2017. Although, dividend payments have increased, Glencore has only paid a dividend in the past 7 years.
Rio Tinto reported net earnings of $3,305 millions, showing a 93 percent change since 2016. However, earnings are expected to decrease over the next 1 to 3 years. Its revenue is expected to grow by 1.2 percent yearly, however, this is not necessarily considered to be high growth.
Glencore’s earnings are expected to grow by 10.1 percent yearly and its revenue by 3.9 percent yearly. Still, this is not high growth, representing only a 20 percent yearly.
Rio Tinto’s one year earnings growth has exceeded the Metals and Mining industry average in the past year.
Glencore’s year on year growth rate has been negative over the past 5 years, however the most recent earnings are above average. Last year they presented loss, but now they are profitable.
Both companies will be able to meet its short term commitments with its holdings of cash and other short term assets. While, Glencore’s cash and other short term assets cover its long term commitments, Rio Tinto’s long term commitments exceed its cash and other short term assets.
Regarding dividends, the current annual dividend yield from Rio Tinto is 3.84 percent, analysts expect next years yield to rise to 4.41 percent. Glencore is currently yielding 1.72 percent and it is expected, to grow to 3.59 percent next year. Both companies expect to cover dividends with net profit in the foreseeable future.
Rio Tinto shares were down 0.44 percent, trading at 3,939.50p, as of today 14:00 (GMT). While, Glencore shares were up 0.18 percent, trading at 408.65p, as of today 14:00 (GMT).