Shareholders in Northern Star continue to be rewarded for their faith in the gold miner, with a dividend boost on Tuesday.
The company posted a net profit of $151.4 million for the 2016 financial year, 65 per cent higher than last year but slightly below analysts’ consensus estimates of $166 million.
The 4¢ second-half dividend was an improvement on last year’s 3¢ payout, and took the total dividend for the year to 7¢.
That was 40 per cent more than the 5¢ paid out by Northern Star during fiscal 2015.
Analysts at Macquarie and Credit Suisse had expected a slightly higher dividend – Macquarie had forecast 8¢ and Credit Suisse 8.38¢.
But the dividend was better than the 6¢ full-year dividend forecast by Deutsche and RBC.
“The dividend was higher than we had expected. That was clearly a positive and probably illustrative that their balance sheet is starting to overflow in some regards,” said RBC analyst Paul Hissey.
“The profit was softer than we had expected but I wouldn’t have thought the market would be too bothered. Earnings numbers are not a huge issue for these types of companies, because inevitably they look great in a bull market and they don’t in a bear market.”
Return on equity
Northern Star managing director Bill Beament was involved with the company’s earliest days as a microcap, and still ranks as its sixth largest shareholder, with a 1.75 per cent stake, according to Bloomberg records.
The 4¢ final dividend will be worth about $428,743 to Mr Beament.
He said return on equity was the true judge of a company’s performance, and that Northern Star was performing strongly in that regard.
“We have achieved this significant growth in profit, cash holdings and the dividend while generating a 39 per cent return on equity and a return on invested capital of 28 per cent,” he said in a statement.
“We have met or exceeded all our key objectives.”
The company’s all-in sustaining cost was $US780 per ounce during the year, meaning it was close to the all-in sustaining cost reported by Australia’s largest-listed gold miner Newcrest, which produced gold at an average of $US762 per ounce.
Northern Star shares almost tripled over the course of fiscal 2016, but have fallen almost 20 per cent over the past fortnight. The stock last traded at $4.73.
The company has cash and cash equivalents of $326 million, and no debt.
With valuations in the gold sector high, Mr Hissey said the market would be keen to hear what Northern Star’s management planned to do with the strong balance sheet.
“Without taking away from the exploration effort, Northern Star have built this business on frugal M&A. I don’t think they can do any more cheap M&A, so the big question is what next?” he said.