Glencore to resume dividend in 2017 as debt reduction on track

Mining and commodities trader giant Glencore (LON:GLEN) just added a fresh sign to a mounting pile of indicators that signal a long-awaited recovery in the mining industry, by announcing it will resume paying dividends in 2017 and also meet its goal this year to cut net debt.

The Swiss company, which was one of the worst-performing stocks in the FTSE 100 last year amid a commodity prices rout, said it will pay out $1 billion to shareholders next year in two equal tranches, equivalent to roughly 7 US cents a share.

Glencore's move to restart dividend payments marks a sharp shift from a year ago, when chief executive Ivan Glasenberg announced an aggressive plan to reduce debt.

The move to restart dividend payments marks a sharp shift from a year ago, when chief executive Ivan Glasenberg announced an aggressive plan to reduce debt, which included selling several assets and the suspension of the dividend.

Glencore also said earnings from its trading division this year will be at the upper end of its guided range of $2.5 billion to $2.7 billion, thanks to “supportive market conditions” in the second half.

It also highlighted the completion of its divestment program, with $6.3 billion in asset sales this year, which puts it on track for $16.5 billion to $17.5 billion in net debt by end of 2016.

“We have delivered on our commitments and done so in a way that has preserved the long-term earnings capability of the group,” Glasenberg said in a statement.

Analysts largely agreed with him. Tyler Broda, from RBC, said the firm was exiting 2016 in “the polar opposite to how it entered,” accomplishing what “few would have thought possible at the start of the year.”

“This is a positive development as we believe investors were not expecting a dividend reinstatement announcement,” said Goldman Sachs’ analyst Eugene King in a note to clients.

While Glencore shares were slightly lower in London mid-afternoon trading (-0.9% to 276p), the stock has had a brilliant year, tripling in value to become the second-best company in the FTSE 100 Index, which groups the 100 largest companies by market value listed on the London Stock Exchange.