HMS Bergbau's Dividend Surge: A Golden Opportunity for Income Investors or a Risky Gamble?

HMS Bergbau AG (HMBG) has triggered investor excitement with its proposed 14% dividend hike for 2025, raising the payout to €1.05 per share from €0.92 in 2024. The move, set for shareholder approval at its August 14 AGM, follows a streak of strong financial performance, including a 28.1% jump in EBITDA and a 6.5% rise in net profit to €13.25 million in 2024. With a 3.2% dividend yield and a payout ratio of just 34%, the question for income investors is clear: Is this a sustainable reward for shareholders, or a risky bet on a company with a short dividend track record and exposure to volatile commodity markets?

The Case for Buying the Dividend Surge: Strong Fundamentals and Growth Trajectory

HMS Bergbau’s dividend growth since 2021 has been nothing short of explosive. After paying just €0.04 per share in 2021, the company hiked payouts to €0.77 in 2022, €0.92 in 2024, and now €1.05 in 2025. This trajectory is underpinned by sustained earnings momentum:
- Sales rose 5.2% to €1.36 billion in 2024, driven by surging demand for coal, cement, and fertilizers in emerging markets.
- EBITDA expanded 28.1% to €20.1 million, fueled by operational efficiencies and a USD 400 million trade finance line secured with Vietcombank.
- Liquidity remains robust at €39.6 million, with shareholders’ equity at €51.05 million, providing a safety net for dividends even if earnings flatten.

The 34% payout ratio—calculated as dividends divided by net profit—leaves ample room for reinvestment. Analysts forecast 25.7% earnings per share (EPS) growth in 2025, driven by expanded operations in lithium and rare earths, as well as a 16% increase in shipping capacity. This suggests dividends could keep rising without straining cash flows.

The stock’s 36% surge in 2024 (to €29.40) reflects investor confidence in its strategy. A 3.2% yield is compelling in a market where many European industrials offer less than 2%, especially amid a dividend-friendly payout ratio.

Risks to Consider: Short History, Geopolitical Uncertainties, and Cash Flow Volatility

While the fundamentals look strong, HMS Bergbau’s dividend sustainability hinges on navigating three key risks:

1. Short Dividend Track Record:
   The dividend history is a mere four years old, with 2022’s €0.77 payout marking the first meaningful increase. A company’s ability to sustain dividends over decades is critical for income investors. While the trend is upward, a single poor earnings year could force cuts.

2. Geopolitical and Commodity Price Risks:
   HMS Bergbau’s core business—trading raw materials—is tied to global energy politics. Ongoing tensions in Ukraine, U.S. protectionism (e.g., MAGA-era tariffs), and fluctuating coal prices in Asia could disrupt cash flows. For instance, a sudden drop in coal demand (now at a record 8.8 billion tons globally) could pressure margins.

3. Cash Flow Coverage:
   While liquidity is healthy, dividends are paid from operating cash flow, not just net profit. The company’s free cash flow for 2024 isn’t disclosed, raising questions about whether the dividend is fully covered by cash generation or relies on financing.

The Bottom Line: A Compelling Entry, but with Caution

HMS Bergbau’s 3.2% yield and 14% dividend hike present an attractive entry point for income investors willing to accept moderate risk. The 34% payout ratio, robust liquidity, and 25.7% EPS growth forecast suggest the dividend is sustainable—if the company can navigate its volatile markets.

However, the short dividend history and exposure to geopolitical shocks mean this isn’t a “set it and forget it” investment. Investors should pair the stock with safer yield plays and monitor key metrics:
- EBITDA growth in 2025 (will it outpace 2024’s 28% surge?).
- Geopolitical developments in Ukraine and Asia.
- Cash flow transparency in future reports.

For those comfortable with risk, HMS Bergbau’s dividend surge offers a rare chance to capture income growth in a sector primed for Asian demand. But proceed with eyes wide open—this is a speculative play on raw materials resilience, not a blue-chip dividend stalwart.

Action to Take: Buy HMS Bergbau shares ahead of the AGM vote on the dividend, but set a stop-loss at €26.00 (a 10% drop from current levels) to limit losses if geopolitical risks flare. Monitor cash flow disclosures closely in the coming quarters.

This analysis assumes the dividend proposal is approved at the August AGM. Past performance does not guarantee future results.