Mining giant Vale S.A. (VALE) is on track to return cash to shareholders via dividend payments and share buyback program. The company recently announced to have received approval of its Executive Board for the payment of the second installment of minimum dividend amounting to US$2 billion. The proposal will now be forwarded to the company’s Board of Directors on October 14, 2011.
The minimum dividend payment of US$4 billion, or US$0.766536226 per share for both common and preferred shares outstanding, was decided in January, 2011. The whole distribution was then decided to be paid in two trances of equal amount on April 29 and October 31.
In addition to the second trance of the minimum dividend, the company proposes to make an additional dividend payment of US$1 billion and if approved, the combined US$3 billion dividend payment will be made on October 31, 2011. Shareholders as on October 14, 2011 and holders of ADRs/HDRs as on October 19, 2011 will be entitled to receive dividend payments.
On a per share basis, the total dividend amount comes to US$0.579472982 per common or preferred share in circulation, as of August 31, 2011.
Earlier to this, the company had already paid extraordinary dividends amounting to US$1 billion in January, its first tranche of the minimum dividend of US$2 billion in April and additional dividend of US$3 billion in August. If the recent proposal of US$3 billion gets approved, the company’s dividend payment in the fiscal year 2011 will amount to US$9 billion.
Apart from dividend payments, the company has an ongoing US$3 billion share buyback program, as approved in June 2011. The shares under the program represent 5.9% of the total number of the company’s shares outstanding as on May 31, 2011. The program will expire on November 25, 2011.
Also, the company recently announced that its fertilizer unit will be investing approximately $15 billion through 2020 in order to satisfy its fertilizer needs at least to some extent. The company currently relies on imports for 80% of its requirement.
The current Zacks Consensus Estimate for the third quarter is $1.37, representing a year- over-year increase of 20.94%. Estimates for the fiscal years 2011 and 2012 are $5.15 and $5.15, representing a year-over-year growth of 58.50% and decline of 0.13%, respectively.
We currently maintain a Neutral recommendation on the stock.