The Lynas Rare Earths Ltd (ASX: LYC) share price has been among the more inspiring ASX success stories over the last few years, despite no dividends having been paid by the company.
The stock has gained more than 250% over the last three years amid soaring demand for rare earths. Right now, it’s trading for $8.68.
Like lithium and copper, which are perhaps better known, rare earths are an essential component of modern technology and, in turn, the green energy transition.
As demand for rare earths has taken off, so have the companyâs earnings.
It posted $601 million of earnings before interest, tax, depreciation, and amortisation (EBITDA) and a $540 million after-tax profit for financial year 2022 â up 156% and 244% respectively year-on-year. It also closed the year with $965.6 million of cash and cash equivalents.
Why, then, is Lynas not offering those invested in its shares a dividend? And could payouts be on the cards in the future? Letâs take a look.
Could dividends be on the horizon for Lynas shares?
As the figures above suggest, Lynas appears financially able to offer shareholders a dividend.
The minerâs earnings per share (EPS) lifted to 59.95 cents last financial year. Even paying out 30 cents of that would see the stock with a healthy 3.46% dividend yield.
But I donât think investors should be holding their breath for dividends in the very near future, for two reasons.
First, while the company is profitable in 2022, thatâs a relatively new development.
It has only posted a profit for two consecutive financial years, having lost nearly $19.4 million in financial year 2020. Itâs also worth noting that Lynasâ revenue slumped 44% in the September quarter.
Thus, it might be waiting until it has more stable earnings before it begins to offer dividends.
Perhaps a more compelling reason Iâm sceptical about forthcoming dividends, however, is Lynasâ growth strategy.
The Lynas 2025 growth plan aims to grow the company alongside the market, diversify its industrial footprint, and increase its product range.
After announcing the plan in 2019, the company declared its accelerating and increasing its efforts in August as it revealed a $500 million expansion project at Mt Weld â fully funded from cash flow.
Speaking on the companyâs recent full-year earnings, CEO and managing director Amanda Lacaze said:
Further investment in capacity increases at each stage of production will ensure that Lynas is well positioned to continue to grow with the market as a supplier of choice to 2025 and beyond.
With such a focus on growth, it makes sense Lynas might forego offering dividends to those invested in its shares.
However, nothing is certain on the ASX. The company could very well be gearing up to offer a dividend as we speak.
The post Could Lynas shares pay a dividend in the future? appeared first on The Motley Fool Australia.
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More reading
- What’s boosting the Lynas share price on Wednesday?
- Which ASX 200 mining shares managed to dig up gains in October?
- Could the Lynas share price have another 15% upside from here?
- 2 ASX companies producing minerals the whole world wants: expert
- Here are the top 10 ASX 200 shares today
Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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