ESI Turnaround Demands Saving Dividend Payouts
Electro Scientific Industries Inc. (NASDAQ: ESIO) may not seem like your typical dividend-paying company. It is in the field of laser-based manufacturing solutions for the microtechnology industry. It just recently announced that it will suspend its quarterly dividend, due to being “in the middle of a major turnaround” with plans to “return to long-term growth, profitability, and cash generation.” While the company talked about its opportunities ahead from an acquisition, with new products and expanding its sales channel, and broader customer interest, guess where the stock is relative to most turnarounds. At $6.50 most recently, its 52-week range is $5.96 to $10.32.
Electro Scientific is a small cap stock worth almost $200 million, but its prior yield was almost 5%. Very few analysts covering the stock, but the general expectation was for losses in 2015 and 2016. The company said this will help it recapture opportunities and will help it maintain its financial strength. That being said, ESI did not change its guidance or financial goals ahead.
Gold and Silver Dividend Trends in Newmont and Silver Wheaton
Newmont Mining Corp. (NYSE: NEM) and Silver Wheaton Corp. (NYSE: SLW) are examples of dividend cuts in the gold and silver mining sector. While these are not the freshest dividend cuts of the featured companies slashing their dividends, they do indicate that the payouts and the massive interest in gold and silver companies when prices were so high just do not hold water when the commodity prices are much lower. The good news is that both of these companies likely can return to higher payouts rapidly if gold and silver prices rise ahead.
Silver Wheaton’s dividend yield is barely 1% now and is less than half of its biggest payout seen in only one quarter in 2013. Newmont’s dividend of $0.025 per quarter represents over a 90% cut from its peak, with a yield now less than 0.5%. Newmont’s dividend threshold had been tied to much higher gold prices back during the gold boom.
Both Newmont and Silver Wheaton stocks are handily off their post-bubble highs, yet the market caps remain high. Newmont and Silver Wheaton are still worth almost $13 billion and almost $8 billion, respectively. What is interesting is that the gold and silver stocks have recovered much more than gold and silver did. Newmont’s $26 share price compares to a 52-week range of $17.60 to $27.40, while Silver Wheaton’s share price of $21.30 is against a 52-week range of $16.57 to $27.66.
Linn Rewarded for More Conservative Payouts
Linn Energy LLC (NASDAQ: LINE) and LinnCo LLC (NASDAQ: LNCO) are considered two-in-one by many MLP and oil and gas infrastructure investors. A joint press release in the starting hours of 2015 showed that the Linn annual budget would cut capital spending roughly in half to $730 million. Its new budget was based on significantly lower crude oil price than in 2014, and assumed an unhedged NYMEX price of $60 a barrel.
The reduction of the Linn distribution and LinnCo dividend was to an annualized $1.25 per unit or share, from the previous level of $2.90 per unit or share. Linn simultaneously announced that it had signed a non-binding letter of intent with the credit platform of Blackstone Group L.P. (NYSE: BX) to fund oil and natural gas development ahead.
It turns out that moderation is sometimes rewarded. Linn Energy saw its unit price rise to $11.15 from $9.95 when it announced this news. The price was recently higher at $12.30, but the 52-week range is now $9.05 to $33.30. LinnCo rose to $11.30 from $10.19 on the first trading day of January, and it was recently trading at $11.43, against a 52-week range of $8.58 to $31.57. These both traded higher on lower dividends and distributions, but they obviously have a long way to go before they are back to being at old highs again.
Peabody Dividend Turns Coal Into Tar and Feathers
Peabody Energy Corp. (NYSE: BTU) recently has seen its operations falter due to the current environment for domestic coal. The company had a huge loss for 2014, versus prior years of operating profits. The big news from Peabody at the end of January was that it slashed its dividend from $0.085 per share per quarter to $0.0025 — or $0.01 annually, from $0.34. This is what investors call a token dividend, just to allow “income-only funds” to still own the stock.
Peabody’s 2015 production is said to be 95% fully priced, and 2016 production remains about 45% to 55% unpriced, yet it is expected to keep losing money, with analysts looking for a wide loss in 2015. The question is not just whether the dividend can return, but whether it and the rest of the U.S. coal mining sector can survive more years of the same treatment under the current administration.
Peabody is far from being alone here. Walter Energy Inc. (NYSE: WLT) finally suspended even its $0.01 quarterly dividend with a January announcement, after it was cut from a $0.125 payout prior to mid-2013. Elsewhere in coal there have even been bankruptcies, and many former coal giants are struggling to survive.
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