Warrior Met Coal’s Dividend Decision: A Risky Gamble or Strategic Hold?

Warrior Met Coal (NYSE:HCC) has declared its quarterly dividend of $0.08 per share, payable on May 12, 2025, to shareholders of record as of May 5, 2025. This decision to maintain the payout amid a projected Q1 2025 earnings collapse raises critical questions about the company’s financial strategy, its flagship Blue Creek project, and the precarious state of the metallurgical coal market. Let’s dissect the risks and opportunities.

The Dividend Dilemma: Can HCC Afford It?

The dividend may seem modest, but its sustainability hinges on Warrior’s ability to stabilize its finances. Analysts project a Q1 2025 loss of $0.05 per share, a 101.9% year-over-year decline, with revenues plummeting 45.3% to $275.22 million. The Zacks Earnings ESP (Expected Surprise Prediction) of 0% suggests no upside surprise is coming—meaning results are likely to meet the grim consensus.

The company’s Zacks Rank #5 (Strong Sell) reflects investor skepticism. Historically, Warrior has struggled: it missed its Q4 2024 earnings by 71.7%, though it beat estimates in three of the past four quarters. Maintaining the dividend under these conditions requires either a near-miracle in Q1 or a reliance on cash reserves.

The Blue Creek Lifeline

Warrior’s future rests on the Blue Creek expansion, a $1 billion project aimed at tripling production capacity to 14 million tons annually. At full capacity, Blue Creek could generate $1.3 billion in incremental revenue and $735 million in EBITDA annually, with a 35% internal rate of return. The project is on track, with $716.5 million already invested and key milestones like the preparation plant’s mid-2025 startup.

However, the project’s success depends on metallurgical coal prices—a market currently in freefall.

Met Coal Prices: Near Multi-Year Lows

Global metallurgical coal prices have cratered in Q1 2025. Platts reported Premium Low Vol (PLV) Hard Coking Coal prices at $171.5/mt CFR China as of April 21—a 3.3% drop from March 2025 levels. Australian FOB prices, though slightly higher at $187.6/mt, are increasingly uncompetitive for Chinese buyers, who are pivoting to cheaper Canadian and Russian coal.

The $250/mt price benchmark assumed in Blue Creek’s financial projections now looks overly optimistic. If prices stay near current lows ($103.56/mt by year-end, as projected by CFD benchmarks), the project’s NPV could collapse, undermining HCC’s cash flow and dividend sustainability.

Steel Demand: A Global Slowdown

Warrior’s coal is critical for steel production, but demand is weakening. Asian steel output fell 2.6% in February 2025, with China’s production down 3.3%—a direct hit to met coal demand. European steel production fared worse, dropping 7.1% in February, as construction and automotive sectors remain in recession.

The Bottom Line: Dividend Risks vs. Long-Term Potential

Warrior’s dividend is a high-stakes gamble. On one hand, maintaining the payout signals confidence in Blue Creek’s eventual payoff. The project’s $5.4 billion NPV and 2.3-year payback period (even after $716.5M invested) suggest it could eventually turn HCC’s fortunes around.

On the other hand, near-term risks are immense:
- Price Volatility: Current coal prices are 30–40% below Blue Creek’s breakeven assumptions.
- Execution Risks: Delays or cost overruns at Blue Creek could drain liquidity.
- Weak Demand: Steel production declines in Asia and Europe show no signs of reversing quickly.

Investors should note that Warrior’s dividend payout ratio is already unsustainable if losses persist. In Q4 2024, it paid out $0.08 in dividends despite reporting only $0.15 in EPS—a payout ratio of 53%. If Q1’s projected loss materializes, the payout ratio would skyrocket to -160%, implying dividends are being funded by debt or cash reserves.

Conclusion: Caution Advised, But a Long-Term Play?

Warrior Met Coal’s decision to maintain its dividend is a risky move given its current financial headwinds. The company is betting on Blue Creek’s success and a rebound in coal prices to justify the payout. However, with Q1 earnings likely to miss estimates, global steel demand疲弱, and met coal prices near decade lows, investors should proceed with caution.

The dividend’s sustainability hinges on:
1. Blue Creek’s on-time delivery and cost adherence.
2. Met coal prices rebounding above $200/mt—unlikely in 2025, but possible if China’s infrastructure spending surges.
3. Stabilizing steel demand in key markets like Europe and South America.

For now, the Strong Sell rating and weak earnings outlook suggest HCC is a high-risk bet. While the dividend may appeal to income investors, the stock’s technical indicators—a 12-month range of $38–$75.53 and a 50-day moving average of $47.65—hint at volatility.

Final Take: Warrior Met Coal’s dividend is a lifeline for loyal shareholders but a risky proposition given the current environment. Investors should monitor Blue Creek’s progress and met coal prices closely. Until fundamentals improve, this remains a speculative play for those willing to bet on a steel market turnaround.

Warrior Met Coal (HCC) data as of April 2025.