10% dividend up for grabs after New Hope posts a ten-fold jump in profits

New Hope (ASX: NHC) is the latest coal miner to post a monster earnings result, with profits up more than 11-fold to $983m.

Earnings at a glance:

Source: New Hope | Table: Market Index

Production falls but who cares

New Hope produced 7.9m tonnes of saleable coal in FY22, down -17.7% compared to a year ago. The flagship Bengalla operation was heavily impacted by unusually high rainfall and covid-related workforce shortages. Costs were also on the rise, with the underlying cost base up 23%.

Still, the decline in production volumes was handily offset by a 176% increase in average realised sales price of $281.8 a tonne.

"Robust market demand for high quality, low emission thermal coal in the first-half of the year was then further strengthened by the Russia-Ukraine conflict, which tightened supply," the company said in a statement.

"With security of supply paramount to our key customers, our outlook is strong with a largely sold and optimally priced forward sales book for the next 12 months."

"With the GC NEWC index pricing greater than US$400 a tonne, the Company is well positioned to achieved continued strong cash generation."

Newcastle coal futures chart (Source: TradingView)

Massive dividend up for grabs

New Hope declared a final plus special dividend worth a combined 56 cents per share. The stock will go ex-dividend on Monday, 24 October.

Based on its current share price of $5.95, this represents a yield of 10.6%.

During FY22, the company generated $1.14bn cash from operations, which helped pay off outstanding debts and support the outsized dividends. New Hope said that future surplus capital will be used for:

• Expansion capital for New Acland Stage 3 and Bengalla Life of Mine increase

• M&A opportunities

• Fully franked dividends

• On market / Off market buy-backs or capital returns

Outlook for coal

New Hope expects a higher-for-longer coal pricing environment as demand continues to outstrip supply. Even at current sky high prices, a limited supply response is expected.

Source: New Hope FY22 Financial Results Release