Avoid Teck Resources After Latest Dividend Cut

Summary
Teck Resources just slashed its dividends.
The company is making additional cuts, but the market environment remains very challenging.
Its stock will continue to suffer great market pressure despite the company’s aggressive cost cutting.
Teck Resources is a risky play.
Teck Resources (NYSE: TCK) has been facing tough days over the past year with the continuing collapse in commodity prices. Yesterday, the company announced it will slash its upcoming dividends by 59% to CAD $0.05 per share; its previous dividend was CAD $0.15 a share. Since the end of 2014, the company has repeatedly slashed its dividends, so this latest dividend cut was already expected. Adding to the evidence, the company's dividend payout ratio has overtaken its net income and TCK's cash flows have not been sufficient to cover them. And the final piece: its market fundamentals have not allowed Teck to sustain the burden of its existing payments.
Almost all of Teck's main product line is undergoing pricing pressure at the moment. In the latest quarter, the company's overall revenue declined by 7% to CAD $2.1B, and gross profits before depreciation declined by 11% to CAD $670 million. With the impact of non-cash after-tax impairment charges of CAD $2.2 billion, its net losses attributable to shareholders in the third quarter stood at CAD $2.1 billion, or CAD $3.73 per share.
This means that the loss is larger than the overall revenues generated by the company... Read more

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