Multi-commodity miner Anglo American (LSE: AAL) is the biggest FTSE 100 loser in today’s trading as I write this Thursday afternoon. The stock is down almost 9% after it released a disappointing production update earlier today. I will come to that in a minute, but first let me mention that it is hardly the first such. Yesterday, Rio Tinto (LSE: RIO) also did the same. As big FTSE 100 dividend stocks I hold in my investment portfolio, this is worth looking at more closely.
Anglo American’s production drop
First, Anglo American’s update. It reported a 10% production decline in the first quarter of this year compared to last year. The company attributes this to Covid related absenteeism and high rainfall that impacted operations, among other operational challenges.
This in itself is a bit disappointing. But it is even more so, considering that the miner has reduced production guidance for commodities like platinum metals, iron ore, and coal for the year as well. Of these, the first two are the biggest contributors to its earnings.
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FTSE 100 dividend stock in peril?
Besides a production hit, Anglo American has also increased the unit cost guidance for both metal groups, in line with rising inflation. At the same time, the realised prices for both has fallen in the first quarter compared to the same time last year as well! In sum, we are looking at lower production, lower prices, and higher costs in 2022. It seems like a no-brainer now that the company’s earnings will be reduced compared to last year.
Including special dividends, the FTSE 100 miner has a yield of almost 8% right now. This makes it one of the few stocks with an inflation beating yield. This could change, however, after considering the update. I will keep a close look out for the next developments in the stock.
Rio Tinto’s cost crunch
Rio Tinto’s share price also fell yesterday after its update, albeit by a lower 5%. Its production too, was impacted for the first quarter across majority of its commodities, compared to last year. It has also warned on cost pressures, saying that “Recent input cost increases are the largest raw material cost hike since the Oil Crisis in 1973”. It also mentions the risks to growth because of interest rate hikes, which will presumably impact demand for commodities.
Yet, I am a comparatively encouraged by its update, because it has not reduced its production guidance. It has not increased it either, but at least this is a shade better than Anglo American. Still, going by a weaker demand outlook and rising costs I do believe that there could be an impact on its earnings this year too.
Big dividend yield!
I do not know how much, but I am watching closely for developments on this front in this case well. At present, it is a big passive income generator for me. Including specials, its current dividend yield is 13.6%, which makes it the most lucrative FTSE 100 dividend stock to buy today. 2022 might not turn out as good for miners as 2021 was, however.
