A V-shaped rally for ex-dividend coal stocks as Newcastle futures hit all-time highs

Tue 06 Sep 22, 12:13pm (AEST)
A close up photo of coal fragments heaped together
Source: iStock

Key Points

  • Newcastle coal futures hit a new all-time high overnight of US$457.8 a tonne
  • Whitehaven, Yancoal and Terracom shares traded ex-dividend in the last few days, they've since recouped the ex-div decline
  • Prime Minister Anthony Albanese said Australia will continue to be a "trusted and stable supplier" of resources on Monday

The structural tailwinds for coal just keep on stacking, with Newcastle coal futures up 5.2% overnight to a fresh all-time high of US$457.8 a tonne.

Coal prices are up almost 200% year-to-date and up 550% since February 2020.

Newcastle coal futures
Newcastle coal futures (Source: TradingView)

More upward pressure for prices

"Coal prices face upward pressure from strong European demand," said ANZ Research in a note last Thursday.

"An impending energy crisis in Europe is likely to switch power utilities from gas to coal, this could increase competition for seaborne coal."

"That said, some relief could come as china and India import more Russian coal."

V-shaped ex-dividend rally

The sheer strength behind coal prices has witnessed a V-shaped rally for three coal names that traded ex-dividend in the past week.

All three names paid out an interim or final dividend worth 5-10% (based on last close before the ex-dividend date)

All three names are now trading 2-10% higher than where they were before the ex-dividend date.

Albanese backs coal exports

Prime Minister Anthony Albanese is trying to find the middle ground between the resources export boom and lowering emissions.

“I want to emphasise that our government will continue to work with your businesses to reduce emissions in a predictable and orderly way, underpinning the energy transition with certainty," said Albanese at the Australian Minerals Industry Parliamentary dinner on Monday.

“In the same way, Australia will continue to be a trusted and stable supplier of energy and resources to our key trading partners," he added.

Printing money vs. elevated share price

Most ASX-listed coal names are trading close to multi-year highs, if not all-time highs.

Its often difficult for investors to justify buying into a vertical share price chart or something that's already run up so much.

Still, a large cap name like Whitehaven Coal posted $2.0bn in net profits in FY22 compared to a current market cap of $7.6bn. The record earnings and shareholder returns were underpinned by a record average coal price of $325 a tonne.

As we know, coal prices have continued to grind higher, with Newcastle coal futures now trading at US$457.8 a tonne.

Whitehaven coal share price chart
Whitehaven share price chart (Source: TradingView)


Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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