Shares in Rio Tinto (LSE: RIO) (NYSE: RIO.US), Lancashire Holdings (LSE: LRE) and APR Energy (LSE: APR) are all up strongly today, after each of these firms updated the market this morning.
In this article I’ll explain what’s happened, and why the shares are up.
Rio Tinto gives back
Iron ore giant Rio has some of the largest, lowest-cost iron ore mines in the world, so profits are holding up well, despite the current weak market for iron ore.
In its 2014 results today, Rio reported post-tax profits of $6.5bn, a 78% increase from 2013. The firm said that capital expenditure had been cut from $13bn to $8bn in 2014, but net cash from operating activities had fallen by just 5% to $14.3bn, despite the weaker iron ore market.
Rio’s net debt fell by 31% to $12.5bn last year, reducing the firm’s net gearing to an undemanding 22%.
As a result, Rio announced a $2.0bn share buyback today, alongside a 12% dividend hike that gives Rio shares a yield of 4.6% at today’s 3,060p share price.
Lancashire returns cash
Specialist insurer Lancashire Holdings offers protection for ships, aeroplanes, oil platforms and terrorism and natural disaster risks — and overall, it’s been a fairly quiet couple of years for the firm, with no major catastrophes to pay out on.
As a result, Lancashire has been returning some of its surplus capital to shareholders, resulting in eye-popping yields.
Today’s final results revealed that the total dividend for 2014, including one-off special dividends, will be $1.85, or around 122p. That’s 32% higher than City forecasts for $1.40, and gives the shares a stonking trailing yield of 19%!
Lancashire’s earnings and dividends vary widely from year to year — the latest consensus forecasts for 2015 suggest the dividend payout will be much lower this year, at $0.90 — although this still gives a prospective yield of 9.3%.
APR Energy recovery?
Shares in temporary power supplier APR Energy are up by 19% as I write, after the firm confirmed that a major new project in Australia has successfully been commissioned, and is due to run until 2017.
This isn’t a new project, but seems to have ignited interest in the stock, which has fallen by 68% over the last year, mainly because the firm failed to renew a major contract in Libya.
However, APR now trades on a 2015 forecast P/E of 18.7, suggesting to me that until we know more about the financial implications of APR’s Libya withdrawal, the shares are a risky buy.