2016 has been a wonderfully good year for Teck Resources Ltd. (TSX:TCK.B)(NYSE:TCK).
At the beginning of the year, many investors thought the company was on a one-way trip to bankruptcy. It still had massive obligations for its share of the Fort Hills oil sands project. Metallurgical coal prices were hitting lows not seen in decades, thanks to Chinese demand falling off a cliff. At least the price of oil was down, which is a key input cost.
Shares temporally dipped below $4 each on the Toronto Stock Exchange in January as investors clamored to sell just about everything.
It’s been nothing but good news since then. Commodity prices have moved higher. The price of oil has stabilized. Recent results have been good, and investors have realized Teck is safe from bankruptcy. And perhaps most importantly, shares have moved from less than $4 to $35, a truly remarkable run.
Now that the company is secure, can investors count on an increase in the dividend? After last year’s dividend cut, the yield is a paltry 0.3%.
A hike in 2017 doesn’t seem likely. Teck still has to contribute close to $1 billion towards its share of the Fort Hills project, which is slated to start production in 2017. It has a little over $1.1 billion in cash, so it should be safe to do that from current funds.
2018 could be the year. Cash flow from Fort Hills will add to the bottom line, and the company has done a nice job staying free cash flow positive throughout 2015 and 2016.
