American shareholders receive unheard-of dividends from coal mines

US coal companies have returned nearly $ 3.7 billion to shareholders in 12-month dividends and buybacks, and S&P Global Ratings expects more this year. This raises yields to unheard of levels, in some cases about nine times that of 10-year Treasuries.

Revenues reflect the health of an industry that is slowly dying. Strong export prices provide healthy cash flows. But with US utilities largely shifting to cheap natural gas and clean renewables, there is little reason to develop or buy new mines.

There has certainly been some growth, mainly for metallurgical coal used for steel production. Peabody, a leading American coal company, bought the Alabama mine in December and Arch Coal Inc. announced plans to open a mine in West Virginia in February.

Some projects are funded based on healthy international demand. American power plants are moving away from coal quickly, but other countries are moving more slowly, especially in Asia. Thermal coal at the Australian port of Newcastle, a global landmark, has nearly doubled since 2016 to about $ 90 per tonne.

Lucas Pipes, an analyst at B. Riley FBR, expects global consumption to grow slowly for about ten years and then gradually decline. “There is no new supply growth, so why should prices fall?” Pipes said.

This is all the more true for companies that sell metallurgical coal used to make steel. Thanks to strong industrial demand, especially in China, prices have more than doubled since 2016 to $ 210 per tonne. For miners, this means a stream of income and several ways to spend it, in addition to returning it to shareholders.