TORONTO (Reuters) - Teck Resources Ltd said on Wednesday that it will double its dividend payout and consider a supplemental dividend annually, based on the diversified miner’s free cash flow, capital priorities and business conditions.
Vancouver-based Teck will now pay an annual base dividend of 20 Canadian cents a share, in quarterly payments of 5 Canadian cents. That is up from 10 Canadian cents annually, paid in two installments of 5 Canadian cents.
Under a new policy, supplemental dividends will be decided by the board and paid on the last business day of each calendar year, Teck said. Any annual payments may be “highly variable” from year to year.
After reporting weaker-than-expected profits on Tuesday that sent its stock down as much as 6 percent, Teck Chief Executive Don Lindsay said on a conference call that a flexible dividend policy made sense for companies in the commodity industry, due to price volatility.
Shares of Teck, North America’s largest producer of steelmaking coal, rose 2.6 percent in early trade Wednesday.
“We believe that the cyclical and capital-intensive nature of the mining industry makes a progressive dividend policy difficult to sustain,” said TD Capital Markets analyst Greg Barnes in a note to clients.
“In our view, a base dividend that is supportable through the commodity price cycle with ‘top-up’ capital returns to shareholders when free cash flow permits makes sense for mining companies.”
In 2015, Teck cut its twice-yearly dividend two times as commodity markets swooned, from 45 Canadian cents to 10 Canadian cents and then 5 Canadian cents.
“The announcement reinforces our positive view on Teck’s improving balance sheet and strong free cash flow,” said RBC Capital Markets analyst Stephen Walker in a note to clients. “The dividend increase is sooner than we expected and we view it as positive for Teck shares.”
Reporting by Susan Taylor; Editing by Bernard Orr