Brazil’s Vale Could Resume Dividend Payouts Depending On Coronavirus Pandemic

Brazilian miner Vale SA (VALE) could resume its dividend payments after an almost two-year hiatus.

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Speaking at a live conference on Friday Vale CFO Luciano Siani Pires said that the company is financially viable to restart its dividend payouts but is first monitoring recent developments of a potential second wave of the coronavirus pandemic before taking a final decision.

Siani Pires added that the decision will depend on the coronavirus impact on China, the main destination of Vale’s exports.

“China today consumes 75% of the world’s iron ore,” he said. “The risk of a second wave of coronavirus there has to be monitored.”

The last time Vale paid dividends was in September 2018. The company withdrew dividend payouts follwing the disaster at Brumadinho, Minas Gerais, when its dam burst in 2019, killing over 270 people.

“Today there is a perception of greater risk for the company because of Brumadinho,” he said. “The company today is negotiated lower than it should be.”

Shares were up 1.3% to $10.41 as of the close on July 2. They are still trading down 21% year-to-date.

Deutsche Bank analyst Chris Terry last month raised the firm’s price target to $13 from $11 and maintained a Buy rating on the stock, saying that he recommends buying the shares on the back of copper’s continued strength, iron ore’s resilience and a coking coal rebound.

Indeed, Vale shows a firmly bullish Strong Buy analyst consensus thanks to a few recent analyst upgrades. The stock now has only Buy ratings, alongside an average analyst price target of $12.99 (25% upside potential). (See VALE stock analysis on TipRanks)