The scale of the dividend cut on the way from Blackrock World Mining Trust (LSE:BRWM) may surprise investors, according to analysts at Stifel, who said the dividend yield will remain relatively high.
In its normal course, the mining sector is volatile, the analysts noted, with BRWM's net asset value total return rising over 17% in 2022 before falling 6.2% in 2023.
"The dividends paid by mining companies are variable and this impacts the dividend paid by BRWM," wrote analyst Iain Scouller in a note to clients.
Based on net revenue of 15.1p embedded in the NAV from the end of December, he forecasts the final 2023 dividend to be cut 36-43% to somewhere between 13.5p and 15.0p.
This implies the total dividend will end at 21.3% to 25% from the 40p in 2022.
With the shares down over 31% to 517p over the past year, Scouller said he thinks investors may be anticipating a cut following the dividend reductions at mining companies, but "there may be some surprise at the scale of this, if our assumptions are correct".
"This may unsettle income investors; however, the dividend yield would still be relatively high at circa 6% post our forecast cut."
Stifel maintained its 'neutral' recommendation on the shares.