ASX-listed lithium stocks have been actively working on ramping up production, and some of these companies are now generating substantial cash flows, which could potentially lead to attractive dividend payouts for investors. The increasing demand for electric vehicles (EVs) has boosted the demand for lithium, resulting in a strong lithium price outlook.
Dividend Growth in ASX Lithium Shares
The fiscal year 2023 witnessed several ASX lithium shares initiating or increasing dividend payments, marking an exciting development for income-seeking investors. Here are some notable examples:
- Pilbara Minerals Ltd (ASX: PLS): Pilbara Minerals, which didn't pay any dividends in FY22, made a significant change by announcing an annual dividend per share of 25 cents in FY23. This decision followed a remarkable 326% increase in statutory net profit after tax (NPAT) to $2.39 billion. The ASX PLS aims to maintain a dividend payout ratio ranging from 20% to 30% of free cash flow.
- IGO Ltd (ASX: IGO): IGO, an ASX mining company with a significant exposure to lithium, reported a 66% year-over-year increase in net profit to $549 million. The company recently updated its shareholder returns policy, targeting returns between 20% to 40% of underlying free cash flow when liquidity falls below A$1 billion. In the FY23 result, ASX IGO's board declared a total dividend per share of 74 cents, marking a substantial 640% increase.
How Do These Dividends Compare to Other Miners?
When assessing the potential dividend yields from ASX iron ore shares in FY24, the dividend yields of Pilbara Minerals and IGO for FY23 appear quite compelling:
- Fortescue (ASX:FMG) Metals Group Ltd (ASX: FMG): Commsec estimates suggest a grossed-up dividend yield of 7.8% for FY24, despite expectations of declining profits due to a fall in the iron ore price.
- BHP (ASX:BHP) Group Ltd (ASX: BHP): BHP shares could deliver a grossed-up dividend yield of 6.8% in FY24.
However, it's essential to note that Pilbara Minerals and IGO may face challenges in maintaining their FY23 profit levels in FY24 due to a decline in the lithium price. This could potentially lead to lower dividend payouts. According to Commsec estimates, the grossed-up dividend yield for Pilbara Minerals in FY24 could be approximately 4.25%, and for IGO, it could be around 4.3%. These estimates suggest a decline from their FY23 dividend payouts, in line with the expected changes in their profitability.
In conclusion, while ASX lithium stocks like Pilbara Minerals and IGO have shown promise in terms of dividend growth, investors should remain mindful of the volatility in the lithium market, which could impact future earnings and dividend payouts. Diversifying one's investment portfolio and conducting thorough research are crucial steps when considering investments in this dynamic sector.