Glencore is still in favour with analysts at Barclays, which despite weakening coal income reckon payouts this year amount to an effective 18% yield that looks well supported going forward/
Payouts comprise a dividend of US$5.1bn (40c/sh), a US$0.5bn top-up dividend (4c/sh) and a US$1.5bn buyback, implying an annualised yield of 18% (14% dividend yield + 4% buyback), says the bank.
Headlines might be about a glut of energy from mild weather while demand destruction in the EU remains a risk for coal prices but things should even out as China’s reopening gains momentum in the second half, Barclays believes.
In short, Glencore trades on attractive valuations, has a unique business model, and best-in-class longer-term returns - the rewards for patience are there to be seen
with best-in-sector FCF (free cashflow yields and undemanding price/earnings and P/NPV".
Barclays' price target is 600p with an overweight rating, while the upside case is for coal prices to remain higher for longer in which scenario its target rises to 900p.
By contrast, the downside case is 204p, which assumes 20% lower commodity prices.