The Top 10 Mining Stocks That Pay You to Hold Them
We compiled a list of the top 10 ASX mining stocks sharing profits with their investors
Tax-loss selling might be dominating the small-cap space as we approach the end of the financial year, but for us at Equities Club, it's also a time to reflect on the broader mining landscape.
While we're always on the hunt for the next breakout junior miner with ten-bagger potential, there's also a certain allure to the steady, reliable returns of dividend-paying mining stocks.
So, instead of focusing on our usual bread and butter – mining small-caps on the ASX – we've taken stock to take a look at the companies that are not only digging for riches but also sharing them with their investors.
We've listed the top 10 ASX-listed dividend-paying mining stocks. Want the full list? Just hit us up at info@equitiesclub.com and we'll shoot it over.
Understanding Dividends in the Mining Sector
A dividend is a portion of a company's earnings paid to a shareholder, most commonly as a cash payout. In Australia, dividends are usually paid twice a year.
Companies distribute dividends for a variety of reasons – to signal financial health, attract and retain investors, or reward their shareholders. However, there's no obligation for companies to pay dividends, and many choose to reinvest profits back into the business.
In the mining sector, companies that pay dividends are those that are in production. A company that is building its mine or exploring for commodities has no earnings and, therefore, nothing to distribute.
Many investors will use large mining company investments for passive income while still searching for the next ten-bagger in the small cap space.
The ASX's Top Dividend-Paying Miners: A Closer Look
The ASX boasts more than 30 mining companies that shared their profits with shareholders in the 2023-24 financial year. To keep things focused, we've honed in on pure-play miners, leaving the oil and gas drillers for another day.
Beyond Iron Ore: Emerging Dividend Players
It's no surprise that the big iron ore players dominate the top spots on the ASX dividend leaderboard for miners. BHP, Rio Tinto, and Fortescue are cash-generating behemoths.
While the battery metals space, particularly lithium, has generated significant buzz, its presence among the top dividend payers is still emerging. Two companies, Independence Group (ASX:IGO) and Mineral Resources (ASX:MIN), have a foothold in lithium production, although their operations are diversified by production of other minerals.
We also see only one platinum group elements (PGE) producer, Zimplats (ASX:ZIM), highlighting the relative scarcity of these valuable metals on the ASX.
PGEs are a group of six precious metals – platinum, palladium, rhodium, ruthenium, iridium, and osmium – that are highly valued for their industrial and technological applications.
Despite coal being a "dirty word" in the energy transition, with governments shutting down coal-fired power plants, three of the top 10 dividend payers are coal miners: Yancoal Australia (ASX:YAL), New Hope (ASX:NHC), and Whitehaven Coal (ASX:WHC). This underscores the fact that coal still plays a significant role in the global energy mix and remains a profitable commodity.
Despite the vast sums poured into gold exploration worldwide, only one gold miner cracks the top 10: Northern Star Resources (ASX:NST).
Will the dividends continue?
Dividends aren’t a sure thing when investing, it all comes down to the market for the commodity they produce and how efficient they are. A bad year in pricing or cost blow-outs can quickly eat away any dividend.
However, based on current trends and market conditions, we can make some educated guesses about the ASX dividend landscape in the coming year.
The iron ore giants, with their massive scale and diversified operations, are big enough to weather commodity price fluctuations and likely to remain reliable dividend payers. However, the size of these payouts could fluctuate depending on iron ore prices and global demand.
When it comes to battery metals, breaking into the top ranks of dividend payers will be challenging. Recent price volatility and the absence of a pure ASX-listed big player in the copper space will likely limit dividend potential in the near term.
We anticipate Northern Star Resources being the only dividend-paying gold stock as other producers just don’t have the size to be paying large dividends. Higher gold prices have been negated by the talk of increased exploration and mining costs eating into profits.
Many analysts believe coal has peaked, with demand projected to fall towards the end of the decade. However, numerous ASX-listed coal miners are debt-free and cash flow positive, suggesting that dividends are likely to continue for the time being.
Our team predicts the top 10 dividend payers will remain relatively stable, with perhaps one or two companies dropping out and being replaced by new contenders in the coming financial year.
Building a Balanced Portfolio
While we at the Equities Club are constantly on the lookout for the next big thing in the small-cap mining space, it's important to remember that today's explorers and developers could be tomorrow's dividend-paying giants.
The mining sector is a playground for all kinds of investors, from those seeking high-risk, high-reward juniors to those looking for the steady income of dividend-paying giants.
As the clock strikes twelve on another financial year, we encourage you to take a good look at your portfolio and consider a strategy that will not only work in the short term but focuses on the long game.