The move caused the shares to fall more than 8 per cent in early trading to 339p. The company, like many of its peers, is facing brutal conditions across the commodities spectrum with oil continuing to fall as Opec - the Organisaiton of the Petroleum Exporting Countries - maintains production while iron ore has also taken a battering.
Michael Hewson, chief market analyst at CMC Markets UK, said the decision by Anglo "could well be the shape of things to come" with rivals BHP Billiton (BLT) and Rio Tinto (RIO) potentially in the firing line as iron ore heads to $30 a ton after breaking through $40 this week.
"At these sorts of levels these two mining giants will feel the squeeze even more as they look at a potential reduction in revenues for 2015 of around 25 per cent, as well as reduced profits," Mr Hewson said.
"At the beginning of this year, Sam Walsh, CEO of Australian giant Rio Tinto, asserted that the prospect of $30 a ton iron ore was in the realms of fantasy land, and would never be reached. Given that we are now $9 away, this fantasy could well be about to turn into a very real nightmare."
BHP is also facing costs related to the Samarco Mineracao dam breaches in Brazil, which led to 13 fatalities as at the company's latest update on 30 November. The Brazilian government said it could be starting legal proceedings against the company and has asked BHP and its partner in Samarco Vale to set up a BRL20bn (£3.46bn) fund to cover remedial costs and damages over the next decade. This, alongside conditions in the iron ore market could put pressure on shareholder payouts, although management has said it is committed to its progressive dividend policy.
Russ Mould, investment director at AJ Bell, added the plunge in the Bloomberg Commodity index to a 17-year low "helps explain Anglo American’s decision today to cancel any dividend payments in 2016". He said this move "piles the pressure on BHP Billiton and Rio Tinto to reassess their shareholder payouts".
“Before today’s decision, Anglo American was going to pay a reduced dividend yield of 29.4p for 2016, according to analysts, still enough for a yield of more than 7 per cent," he said.
"Yet boss Mark Cutifani has decided such a payment is untenable in the current environment in a stark reminder to investors to check dividend cover and be very careful if a dividend looks too good to be true – because it probably will be."
