Peabody Energy. Source: Flickr
Peabody Energy (NYSE:BTU) is the largest coal miner in the U.S. by market capitalization.
As of Sept 2021, Peabody has a market capitalization of $1.6 billion USD, about 20% larger than its closest counterpart, Arch Resources (ARCH).
Peabody used to be a cash dividend payer back in fiscal 2019 but has suspended the dividends indefinitely since 2020.
Until now, Peabody has yet to reinstate its cash dividends.
Aside from cash dividends, Peabody also has returned quite a considerable amount of cash to shareholders in the form of share buyback.
For example, Peabody bought back more than $800 million USD of common stocks in fiscal 2018 and $330 million USD of common stocks in fiscal 2019.
Similar to the fate of its cash dividend, Peabody also has indefinitely suspended the stock buyback since fiscal 2020.
The following excerpt extracted from BTU’s 2020 annual report explains about the company’s dividend policy:
-
Dividend Policy
We declared and paid quarterly dividends every quarter in 2019, and a supplemental dividend was declared and paid during the first quarter of 2019. We suspended dividends in 2020.
Therefore, Peabody Energy is currently a non-dividend-paying stock that does not declare or pay any cash dividend to shareholders who hold the company’s common shares.
While Peabody does not currently pay a dividend, it may resume the suspended dividend in the future as most coal miners do, including its peers such as Alliance Resource Partners (ARLP) and Arch Resources (ARCH).
For your information, Alliance Resource Partners has resumed paying cash dividends, even during the COVID-19 pandemic period.
Therefore, we are not ruling out the possibility of a cash dividend coming from Peabody Energy someday in 2021 or in 2022.
That said, in this article, we are going to find out how likely BTU is in declaring a cash dividend in 2021 based on the company’s guided financial outlook for fiscal 2021.
Let’s go take a look.
Peabody’s Cash Dividend Topics
1. Dividend History And Yield
2. Projected Coal Volume 2021
3. Projected Profitability 2021
4. Projected Revenues And Earnings
5. Conclusion
Peabody’s Dividend History And Yield
| Fiscal Year | Peabody’s Cash Dividend Per Share Declared ($ USD) | Peabody’s Dividend Yield (%) |
|---|---|---|
| 2018 | $0.49 | 1.3% |
| 2019 | $2.41 | 11.4% |
| 2020 | $0.00 | 0% |
The table above shows Peabody Energy’s historical dividend rate and yield dated back to fiscal 2018.
As seen, Peabody’s cash dividend came in at $0.49 USD per share in 2018 and a whopping $2.41 USD per share in 2019.
The massive dividend declared in 2019 was primarily due to a special dividend rate of $1.85 declared in the same fiscal year.
As a result, Peabody’s dividend yield came in at a whopping 11.4% in fiscal 2019 because of the one-time special dividend.
While Peabody’s cash dividend was looking good in 2019, it came crashing down in fiscal 2020 when the company totally suspended the cash dividend indefinitely.
The suspension was mainly attributed to the COVID-19 pandemic which had negatively affected Peabody’s coal shipment volume as energy demand plunged during 2020.
As such, Peabody had to suspend not only the cash dividends but also the share buyback to maintain its financial flexibility during the pandemic.
Peabody’s Projected Coal Volume 2021
| Fiscal Year | PRB Thermal – Total | Other U.S. Thermal – Total | Seaborne Thermal – Total | Seaborne Metallurgical |
|---|---|---|---|---|
| 2018 Reported | 120.3 | 33.6 | 19.1 | 11.0 |
| 2019 Reported | 108.1 | 27.9 | 19.5 | 8.1 |
| 2020 Reported | 87.2 | 18.3 | 19.0 | 5.6 |
| 2021 Projected | ~85-90 | ~16-17 | ~17-18 | ~4.5-5 |
The case of a dividend coming from Peabody Energy will largely depend on the company’s guided financial outlook in fiscal 2021.
If Peabody expects business to pick up that will result in soaring revenue and higher profitability, then the case of a reinstated dividend in fiscal 2021 will be extremely compelling.
In this aspect, we will first look at the firm’s coal shipment volume as depicted in the table above.
As shown, Peabody’s coal shipment volume has been on a decline since fiscal 2018 across all coal segments and regions.
For example, Peabody’s largest coal sales volume, the PRB thermal, will only come to between 85 and 90 million tons in fiscal 2021, a level about the same as that in 2020 and a far cry from the figure reported back in fiscal 2018.
In other words, Peabody expects its coal sales volume to remain flat or to head slightly lower in fiscal 2021 compared to 2020.
Similarly, Peabody also guided significantly lower coal sales volumes for other coal segments for fiscal 2021, including the seaborne thermal and seaborne metallurgical at 18 million tons and 5 million tons, respectively.
The 2021 projected figures are roughly 10% lower than the reported figures in fiscal 2020.
Therefore, Peabody will be shipping significantly less coal in 2021 compared to 2020 and the gap is even bigger compared to other fiscal years such as 2019 and 2018.
The question now is will Peabody reinstate the suspended cash dividend in fiscal 2021 given that the projected coal sales volumes are going to be down significantly.
My best guess is that Peabody’s dividend reinstatement in 2021 will most likely go up in smoke.
Peabody’s Projected Profitability 2021
| Fiscal Year | PRB Thermal Revenue Per Ton ($ USD) | Other U.S. Thermal Revenue Per Ton ($ USD) | PRB Thermal Cost Per Ton ($ USD) | Other U.S. Thermal Cost Per Ton ($ USD) | PRB Thermal EBITDA Per Ton ($ USD) | Other U.S. Thermal EBITDA Per Ton ($ USD) |
|---|---|---|---|---|---|---|
| 2018 Reported | $11.84 | $41.32 | $9.47 | $32.54 | $2.37 | $8.78 |
| 2019 Reported | $11.37 | $46.85 | $9.32 | $33.91 | $2.05 | $12.94 |
| 2020 Reported | $11.37 | $38.73 | $9.14 | $29.51 | $2.23 | $9.22 |
| 2021 Projected | $11.00 | $39.50 | $9.35 | $30.50 | $1.65 | $9.00 |
Aside from coal sales volume, the case of a cash dividend coming from Peabody in 2021 also will depend on the company’s projected financial position.
In this aspect, we will look at the projected financial position of Peabody’s largest coal segment which is the PRB thermal and Other U.S. thermal as shown in the table above.
As seen in prior discussions, Peabody’s total thermal coal volume – PRB and Other U.S. thermal combined – made up more than 80% of the company’s total coal sales in fiscal 2020 and this composition will not change much in fiscal 2021.
Therefore, the thermal coal segment will dictate much of the profit of the company, and hence, the availability of a cash dividend.
Similar to coal sales volume, Peabody’s revenue and EBITDA per ton for both PRB and Other U.S. thermal coal also have been on a decline.
For example, Peabody’s PRB thermal coal revenue per ton is expected to come in at only $11.00 USD, a year-on-year decline of 3% and a 7% declined compared to the figure reported in fiscal 2018.
While Other U.S. thermal revenue per ton is projected to be higher at $39.50 in fiscal 2021, it is still significantly down compared to the figures reported in fiscal 2018 and 2019.
More importantly, the mining cost per ton is estimated to be significantly higher in fiscal 2021 compared to fiscal 2020.
As a result, Peabody’s EBITDA per ton for both PRB and Other U.S. thermal coal is going to be a lot lower in fiscal 2021.
In particular, Peabody’s PRB thermal EBITDA per ton will come in at only $1.65 USD, a year-on-year decline of 26%.
Therefore, Peabody’s projected financial position in fiscal 2021 will be flat in the best-case scenario and most likely be worse.
Since Peabody has guided for a lower outlook for fiscal 2021, the company will likely continue to suspend the cash dividends, possibly until a much better outlook is forecasted.
Peabody’s Projected Revenue And Earnings 2021
| Fiscal Year | Peabody’s Revenue ($ Millions) | Peabody’s Earnings Per Share ($ USD) |
|---|---|---|
| 2018 Reported | $5,582 | $4.43 |
| 2019 Reported | $4,623 | -$2.04 |
| 2020 Reported | $2,881 | -$19.14 |
| 2021 Projected | $3,100 | -$0.25 |
| 2022 Projected | $3,460 | -$0.08 |
Aside from the company’s own outlook, we also look at the expectation from analysts which is shown in the table above.
From the perspective of the analysts, Peabody’s revenue and earnings per share will come to about $3.4 billion and -$0.25 USD per share, respectively, on average for fiscal 2021.
While Peabody’s revenue estimate is about 6% higher in fiscal 2021, the projected figure is still significantly down from its previous highs reported in fiscal 2018 and 2019.
Therefore, analysts’ estimated revenue for Peabody Energy for fiscal 2021 is only slightly better than that in 2020 while earnings per share are expected to be improving significantly.
However, at an EPS of -$0.25 USD for fiscal 2021, Peabody will still be having a loss.
And, Peabody’s losses will persist into fiscal 2022 at an estimated EPS of -$0.08 USD according to analysts.
In short, analysts expect Peabody to be nonprofitable in fiscal 2021 and even in fiscal 2022.
In view of the expected losses in fiscal 2021 and 2022, the case of a reinstated cash dividend from Peabody Energy will likely go down the drain for the time being.
Not until Peabody’s financial position improves significantly, it is unlikely for the company to resume the suspended dividends.
As of now, Peabody is still putting on hold not only its cash dividends but also its share buyback.
Conclusion
Peabody paid a cash dividend back in 2018 and 2019 but suspended it in 2020 when the COVID-19 pandemic hit.
While Peabody has yet to reinstate its suspended cash dividends, it may do so in fiscal 2021 if the outlook is good.
Unfortunately, Peabody has guided for a lower coal shipment volume for fiscal 2021 compared to 2020 and is significantly down compared to 2018 as well as 2019.
In addition, Peabody’s guided revenue per ton and EBITDA per ton for its thermal coal also will be lower in fiscal 2021 compared to 2020.
The lower outlook for thermal coal means that Peabody’s largest profit segment will be affected.
Moreover, analysts expect Peabody to make a loss in fiscal 2021 and the loss will persist into 2022.
Judging from the lower outlook, Peabody is unlikely to reinstate the suspended cash dividends in 2021 as the company’s financial position will be flat compared to 2020 and much worse than that in fiscal 2018 and 2019.
In short, the case of a dividend from Peabody in fiscal 2021 will not happen for now.
Credits and References
1. Peabody’s financial figures were obtained and referenced from the company’s financial statements which are available at the following links:
a) Peabody Earnings Releases
b) Peabody Energy – Yahoo Finance
c) Peabody Energy Dividend History
2. Featured images in this article are used under creative commons license and sourced from the following websites: Peabody Energy and Balloon.
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Disclosure
The content in this article is for informational purposes only and is neither a recommendation nor a piece of financial advice to purchase a stock.
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