Freeport To Suspend Cash Dividend, Aims To Boost Cash Flows

Freeport-McMoRan Inc.’s (NYSE:FCX) board will suspend the quarterly cash dividend of 5 cents per share planned earlier for May 1, 2020, in response to the COVID-19 pandemic. Moreover, the declaration and payment of any future dividends remain at the discretion of its board and depend on factors such as global economic conditions, the company’s financial results and cash requirements.

The company is reviewing plans at each of its global copper and molybdenum operations to reduce costs and capital expenditure for achieving the maximum cash flow in the current market conditions.

Moreover, Freeport stated that the revised operating plans may lead to a temporary reduction in copper and molybdenum production in the Americas, which are witnessing low commodity prices. The company is expected to report its revised operating and financial plans along with first-quarter 2020 results in April.

Per management, given the sharp decline in copper prices in recent weeks, Freeport’s actions to address costs and capital spending as well as preserve a strong liquidity position are necessary to maintain flexibility in the current global economic uncertainties.

Notably, the company is establishing a large scale, low-cost production from its underground ore bodies at Grasberg. This will likely enable it to generate substantial cash flows beyond 2020.

Freeport’s shares have lost 56.5% in the past year compared with the industry’s 41.7% decline.

Zacks Rank & Key Picks

Freeport currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the basic materials space are Newmont Corporation (NYSE:NEM) , Franco-Nevada Corporation (TSX:FNV) and Novagold Resources Inc. (NYSE:NG) . While Newmont and Franco-Nevada currently sport a Zacks Rank #1 (Strong Buy), Novagold carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Newmont has an expected earnings growth rate of 72% for 2020. The company’s shares have gained 19.3% in the past year.

Franco-Nevada has an expected earnings growth rate of 37.6% for 2020. Its shares have returned 30.1% in the past year.

Novagold has an expected earnings growth rate of 11.1% for fiscal 2020. The company’s shares have surged 61.6% in the past year.

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