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Randgold: a defensive dividend hike?

A possible showdown with DRC lawmakers overshadowed an otherwise strong set of full-year numbers
February 5, 2018

The market had two stories to digest on Randgold Resources’ (RRS) full-year results day. The financial one was largely positive: in 2017, the FTSE 100 miner brought down cash costs, produced more gold than it said it would, and increased an already robust cash pile by 39 per cent.

6,918p

This in turn allowed Randgold to double its dividend to $188m (£133m), an impressive increase of more than 1,600 per cent in a decade of wild swings in the yellow metal. Investors should not be overly surprised by the hike, which still aligns with a policy to keep at least $500m of cash on hand. But the scale of the increase looks set to test compliance with another policy – to match or increase dividends each year – from 2019 onwards.

Short-termism is not a mindset associated with Randgold, but there is good reason to think distributions have been raised to deter investor selling. Why investors might want to reduce their holdings brings us to our second story: the enactment of a new mining code in the Democratic Republic of Congo, which could raise royalties and introduce a new tax on so-called 'super profits' at the Kibali mine. Appeals to president Joseph Kabila have been made, and potential legal action invoked. Analysts expect pre-tax profit of $557m and EPS of $3.91, up from $481m and $2.92 in 2017.

RANDGOLD RESOURCES (RRS)  
ORD PRICE:6,918pMARKET VALUE:£6.51bn
TOUCH:6,916-6,922p12-MONTH HIGH:8,255pLOW: 6,495p
DIVIDEND YIELD:2%PE RATIO:33
NET ASSET VALUE:3,939¢NET CASH:$720m
Year to 31 DecTurnover ($bn)   Pre-tax profit ($m)Earnings per share (¢)Dividend share (¢)
20131.1440230250
20141.0935325460
20151.0026120366
20161.20403264100
20171.28481296200
% change+7+19+12+100
Ex-div:22 Mar   
Payment:18 May   
£1=$1.41