The business of selling copper to China is even better than expected for Freeport-McMoRan (FXC), one of the world's leading miners and especially prominent as a player in the copper markets.
FXC pleased investors today by announcing a special one-time $1 dividend and a two-for-one stock split as a way to return excess cash to shareholders.
With copper demand rising and supply tight, the metal is hitting new records over $9,000 a ton.
FCX spends about $2,000 a ton to produce that metal, which means it is earning over $3 in free cash flow for every pound of copper it digs up.
Today's dividend will deliver about $437 million of that roughly $2.9 billion in annual cash flow back to shareholders while leaving the company plenty of money to fuel expansion.
Unlike a rival like Rio Tinto (RIO), which is carrying substantial debt, FCX is practically debt-free and so can also make acquisitions on credit as it finds opportunities.
But in the meantime, this is big news in a crowded trade and will encourage even more investment in commodity names from crossover players. This kind of dividend -- if it is the taste of things to come -- can only get the income-oriented traders interested.
However, the cash-strapped names like RIO and, to slightly less prominent extent, Anglo American (thinly traded here as (AAUKF.PK) and Xtrata (XSRAY.PK) , will probably have a hard time keeping up with FCX, (VALE) and BHP Billiton (BHP) in the dividend world.
As always, there will be winners and losers.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
