Joy Global Inc. (JOY) continues to feel the pain of the worst commodity sell off in history. This Zacks Rank #5 (Strong Sell) recently slashed its dividend to almost nothing.
Joy Global makes mining equipment for surface and underground mining.
Joy Global Cuts Its Dividend to Just 1 Cent a Quarter
On Dec 16, when it reported its fourth quarter results, Joy Global also announced it was slashing its dividend due the “significant downturn in commodity prices” and the impact it has had on the company’s revenue and cash flow.
It cut it to just $0.01 a quarter, which is a yield of 0.3%.
It had previously paid $0.20 a quarter, its highest dividend payout since 2003.
This was the company’s first dividend cut since 2003. It didn’t even cut the dividend during the Great Recession. But this commodity downturn is more severe than even 2008.
It is lasting longer. Joy Global has no choice but to conserve cash. The company said that if the 1 cent dividend is maintained for the year it would reduce cash outlays by $75 million.
Joy Global also conserved cash by not repurchasing any shares in the fourth quarter.
How Bad Was It in 2015?
The commodities downturn is not for the faint of heart. Yes, it’s really that bad.
For Joy Global, it meant fourth quarter bookings fell 21% to $617 million. For the full year, bookings were down 25% to $2.7 billion.
The company lost $13.43 per share in the quarter compared to making $1.31 a year ago. For the year, it lost $12.02 per share.
Fiscal 2016 earnings are expected to fall 84.9%.
The analysts have been busy slashing their estimates. 8 were cut in the last 30 days pushing the Zacks Consensus down to $0.29 from $1.30 over the last 3 months. That is a dramatic reduction.
But it’s the new reality.
“With global mining capital expenditures expected to step down again in 2016, we remain intensely focused on cost reduction and cash generation,” said Ted Doheny, President and CEO.
Shares Bounce Off of Multi-Year Lows
It was looking grim for the shares ahead of the earnings report. But once the news was known, and the uncertainty was gone, the shares actually got a boost.
But how long will that last?
With a forward P/E of 46.7x, it’s not exactly cheap even at these beaten down levels. And with the dividend cut to the bare bones, investors will not be rewarded for their patience.
If you must invest in a company in this industry, you might want to consider Astec Industries, Inc. (ASTE). It’s a Zacks Rank #2 (Buy) which is expected to grow earnings by 8% this year and another 24% next year.
It’s not a pure mining play, however. While it sells rock crushing equipment, it also has a big customer base in the energy sector and it makes equipment for the asphalt road industry.
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