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BHP and Anglo American expected to positively surprise with dividend payouts, says UBS

Glencore's dividend announcement is expected to slightly disappoint

BHP Group PLC -

BHP PLC (LON:BHP), Rio Tinto PLC (LON:RIO), Fortescue Metals Group Ltd (ASX:FMG), Anglo American PLC (LON:AAL) and Glencore PLC (LON:GLEN) are expected to announce the return of about US$26bn to shareholders alongside their June-2021 results, said analysts at UBS.

“We expect BHP to positively surprise due to stronger than expected 1H EPS, Anglo to positively surprise by moving to a 60% payout (from 40% historically) and Glencore to slightly disappoint by sticking to the 6cps commitment made in Feb-21,” the analysts said.

“Even though commodity prices have positively surprised in 1H21, we expect Glencore to stick to its 6cps proposal for 1H21 given the relative weakness of thermal coal vs iron ore, the desire of management to further deleverage the business (from US$16bn at Dec-20 to US$10-13bn) and the uncertainty about a potential fine by the Department of Justice.”

They noted the potential for BHP to return some cash via a buy-back rather than a dividend, although the company would be unlikely to start a buy-back at the current elevated share price.

In terms of the iron ore shipments for the June quarter, UBS expects Vale SA (NYSE:VALE) to lift shipments about 11% year on year, BHP and Fortescue to be broadly flat, while Rio Tinto’s shipments are expected to drop about 12%.

“We expect Vale, FMG and BHP to deliver towards top end of FY21 guidance while RIO is at risk of falling short of the mid-point after a weak 2Q.”

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