The baseline for economy and prices of commodities are running quite low these days, which has made the board of directors of a lot of big companies worried about the future earnings of those companies. One such example is Freeport-McMoRan Inc. (NYSE:FCX). The management of Freeport, on March 19, 2015, announced that the company would be reducing its dividends.
Note here that the investors were already expecting the company to slash the dividends; what they were not expecting was such a huge cut. Freeport-McMoRan Inc. (NYSE:FCX) has announced to give just enough amount of dividend to keep the income orientated investors interested in the company. According to a number of market analysts, it seems like the company is in the middle of a financial crises.
It is important to mention here that Freeport deals with commodities business. Where most companies focus on the exploration of gold, aluminum, steel, gas and oil, Freeport-McMoRan Inc. (NYSE:FCX) deals with the exploration of silver, cobalt and copper etc. Not to mention that the company also deals with gas and oil exploration.
Freeport-McMoRan Inc. (NYSE:FCX) has announced that it would be cutting its dividend by 84 percent. Compared with the cuts of similar companies, this reduction is quite significant. The previous dividend rate of the company was recorded to be at $0.3125 for each share. Now Freeport will be giving a dividend of $0.05 for each share. The reason for the decline in dividend was declared to be the weak prices of commodities.
The management of the company, while announcing the cut, also mentioned that the company plans on increasing the dividend as soon as the situation in the markets becomes stable. It is worth mentioning here that corporate companies do not like reducing their dividends, for a strong dividend to the investors suggests that the company is doing great with its business, which consequently means new investors for the company.
Board of directors of Freeport-McMoRan Inc. (NYSE:FCX) further mentioned that the company wants to keep its balance sheet stable during this tough market situation. In order to keep the balance sheet strong, the company needs to lower its capital spending. Moreover, the company will have to look for some additional funding in order to balance out its capital expenditures in the oil and gas business.
The management further mentioned that the company is planning on increasing its production and lowering the capital spending- a strategy that will allow it to reduce the amount of debt on the company.
Freeport, on the last trading day of March 24, 2015, closed its stock price at $19.33, which was quite close to the 52 week low of the company. The 52 week range of Freeport-McMoRan Inc. (NYSE:FCX) has recorded to be at $16.43 to $39.32. Consensus target price on the stocks have come down to $25.53. Analysts are expecting an EPS (earnings per share) of $0.87 for the company.
