Lynas Rare Earths Ltd (ASX: LYC) was certainly one of the hottest ASX shares on the share market last year. As we covered last month here at the Fool, Lynas managed to give its investors a very impressive 155% return over 2021. Last year proved to be a year in which ASX investors looked to what was perceived to be futuristic resources companies for returns. We saw enormous interest in lithium miners like Pilbara Minerals Ltd (ASX: PLS), battery tech companies like Novonix Ltd (ASX: NVX), as well as rare earths miners like Lynas.
Rare earths is a slightly misleading name for the minerals that Lynas extracts. Lynas' rare earths like neodymium, praseodymium, lanthanum and cerium are not 'rare' in the traditional sense. In fact, they are some of the most abundant minerals on Earth. Rather, finding large, concentrated deposits of them is rare.
But we digress.
Zooming out, and the returns are even more impressive for Lynas shareholders. This company is one that remains up an eye-watering 910% over the past five years, and up more than 600% since March 2020.
I'm sure Wesfarmers Ltd (ASX: WES) is kicking itself for not getting a hold of Lynas when it made a bid for the company back in 2019. Its $1.5 billion offer certainly looks like a lost opportunity now that Lynas has a market capitalisation of $8.3 billion.
But now that shareholders have enjoyed such pleasing gains in recent times, many might be wondering when they might get rewarded for simply holding the shares. I'm talking about dividend payments, of course.
Image source: Getty Images
At Lynas, dividends are scarcer than rare earths
So do Lynas shares pay a dividend? The answer is a resounding no. Lynas Rare Earths has never paid out a dividend to its shareholders.
That's not to say it couldn't though. Over FY2021, the company made $235.3 million in earnings before interest taxes, depreciation and amortisation (EBITDA). That translated to an earnings per share (EPS) of 18.08 cents per share. If Lynas hypothetically wanted to pay out 10 of those 18.08 cents of EPS as a dividend, it would have given the Lynas share price a yield of roughly 1% on today's pricing.
But it's possible that due to this company's far-from-secure earnings base, it has decided to keep its powder dry. To illustrate, although FY2021 saw the company report healthy earnings, the company actually lost money on an EPS basis over the preceding financial year, FY2020. Back then, Lynas reported negative EPS of -2.79 cents per share. Obviously, if a company is losing money on an earnings basis, it can't really afford to fork out a dividend.
Resources companies like Lynas can never predict when the market for the commodities they extract might be favourable or unfavourable. But this can make all the difference between losing money and making a healthy profit. Perhaps Lynas' management wishes to keep its balance sheet as fortified as possible for this reason. Thus, this might be why Lynas decided to not pay out a dividend over FY2021.
But who knows what the future might hold. If the company keeps growing the way it did in FY2021, then shareholders might eventually get some income from their Lynas Rare Earths shares.
