The Saracen Mineral Holdings Limited (ASX: SAR) share price will be on watch today after the company announced record profit and a first-time dividend.
Saracen is one of the larger ASX-listed gold miners with an annual production of more than 300,000 ounces per year from its Thunderbox and Carosue Dam operations in Western Australia.
Saracen FY19 Key Points
- Net profit after tax (NPAT) increased by 22% to $92.5 million
- Underlying NPAT rose 40% to $94.2 million
- EBITDA rgew 11% to $219.5 million
- Gold production reached a record 355,077 oz, up 12%
- Saracen has indicated dividends will be paid for the first time from FY20
What Were Analysts Expecting?
Bell Potter analysts estimated NPAT of $93 million, which falls between the statutory and underlying NPAT figures reported by Saracen. The difference between the underlying and statutory figures was attributable to the expensing of deferred exploration costs, a loss on disposal of fixed assets and an obsolete stock write down.
Saracen has not paid a dividend before, but an inaugural dividend policy was announced this morning which will see a target payout ratio of 20-40% of NPAT from FY20 onwards, subject to Saracen maintaining a minimum cash balance of $150 million.
Are Saracen Shares A Buy?
Saracen has had an impressive year with record profit and its share price up almost 35% year-to-date. Although the company announced record profit and a first-time dividend, Saracen shares are trading down almost 4% at the time of writing.
Nonetheless, despite its impressive FY19 performance, Saracen is a price-taking business and relies on commodity prices to perform well. This makes me question how stable the dividend will be and whether it can be maintained.
Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.