Digging Deeper Into Vale SA's Dividend Update

Vale SA (NYSE: VALE), the world's largest iron ore producer, wants to change its dividend policy. In a statement released on Wednesday, the Rio de Janeiro-based company said that it would propose changing the dividend policy that currently focuses on promising a minimum annual payout to one that aligns shareholder returns with cash generation.
In other words, the company will abandon its practice of suggesting a minimum dividend payment at the start of each year. Instead, it now wants to propose dividends only after analyzing its financial health and ability to generate future cash flows. Moreover, the company, which pays first dividend in April and the second in October, also wants to make the first payment in April followed by second in October, next year.
Less than two months ago, Vale said that it would propose reducing the minimum dividend for 2016 to zero. That showed the management's intention to scrap the dividend until the market environment improves. The miner will put these proposals before the shareholders at a meeting on April 25.
For Vale, a dividend cut has been pretty much on the cards. The company has recently posted a record annual loss of $12.13 billion for last year, driven in large part by massive write downs of $9.37 billion. It has also been reducing dividends that peaked at $9 billion in 2011, dropping to $4.2 billion in 2014 and $1.5 billion last year. The miner needed to preserve cash in order to fund its operations, including completion... Read more

Older articles featuring VALE: