When it comes to FTSE 100 dividends, I am not complaining right now. In 2021 they bounced back and a few stocks even had double-digit dividend yields. In 2022, if forecasts are to be believed, these yields could only get better. At the very top of the dividend yield table sits the Russian miner and steel producer Evraz (LSE: EVR), with a yield of almost 16%.
I invested in the stock a while ago, and have reaped both capital gains and passive income from it. But when Goldman Sachs reiterated its ‘sell’ rating on the stock recently, it did set off an alarm bell in my mind. And only because of where the stock is at right now. Let me back up a bit to explain myself properly.
What happened to the Evraz stock price?
The investment bank said the same thing back in September as well. But it did not mean very much to me at the time. Sure, the stock had slumped. But so had the rest of the stock market. Also, while the prospects for commodity stocks had just started looking more moderate, as forecasts for industrial metal prices were cut, the stock still looked cheap in terms of market valuations to me. Clearly, other investors felt the same way. Because its share price picked up from October onwards. And it stayed relatively elevated until the end of 2021. In the meantime, its dividends continued to be good too.
But January has been a tough month for the stock, even though the FTSE 100 index reached the highest levels since early 2020 last week. It is down by 18% in the past month alone. So, as Goldman reiterated its sell stance on it, it was a red flag for me.
Why is the FTSE 100 stock slumping?
One big issue for me is the geopolitics in its home country. Russia’s tensions with Ukraine may just have implications for the stock. Though how much by, remains to be seen considering that it has assets across the world. Rising inflation is already having an impact on stock markets too, which could impact all stocks, including Evraz.
Also, the International Monetary Fund (IMF) just reduced its global growth forecast for 2022 by 0.5 percentage points to 4.4%, which is also a decline from the 5.9% growth estimate for 2021. In particular, forecasts have been reduced for China, which is the biggest market for industrial metals in the world. This could have further implications for miners.
Would I sell it?
So, I feel I should brace myself for some hit to my capital gains from the stock. Indeed, I can see that already. However, the dividend yields are still pretty damn good. And analyst estimates so far suggest they are expected to remain elevated in 2022. Of course, these estimates could change with evolving circumstances. But for now, I think the stock is good for me to hold for the dividends alone. I would not buy more of it though, until I have more clarity on its future, which should happen when it releases its results next month. But I would certainly not sell it today.