Trade idea of the day time to consider Anglo American

What: 

We are seeing a similar pattern across the miners; earnings are skyrocketing, debt burden has been reduced significantly and dividends are being bumped up to healthy levels. 

Anglo American, was the last of the big miners to report today and it too sung from the same song sheet. Aided by higher commodity prices, aggressive cost cutting and a focus on improving operational performance, Anglo American has returned to health. It has managed to halve net debt to $4.5 billion in 2017, whilst annual earnings have surged by just shy of 50%. 

This turnaround has also enabled Anglo to declare a final dividend of $0.54 cents a share, which takes the full year pay-out to $1.02 a share, its highest dividend pay-out in over 10 years. Not bad considering that dividends were only reintroduced last year, with a pledge to pay 40% of underlying earning.  

Perhaps Anglo’s results are all the more impressive because it was one of the hardest hit during the commodity market turndown in 2015/16, when it was forced to suspend its dividend, and sell assets as it struggles to pay down debt. 

Anglo had 47% fewer assets than in 2012, yet it generated 9% more product, figures that lay stark the benefits that the firm is reaping from restructuring, reorganisation and higher productivity. 

All in all, today’s results paint a picture of a vastly different company, one which is now considering expanding some projects.  

How: 

Anglo’s share price is currently up 10% since the beginning of the year and 82% since June last year. Since its nadir in 2016 the stock is up a whopping 675%. However, it is still only half of what it was in 2011. 

The share price has fallen back as earning today didn’t quite match forecasts and metal prices are also lower, potentially providing a good entry opportunity.