Is the 16% dividend yield on New Hope shares a trap?

Is this coal miner going to continue paying big dividends?

| More on:
A business woman looks unhappy while she flies a red flag at her laptop.

Image Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

New Hope Corporation Ltd (ASX: NHC) shares have provided investors with some big dividends recently.

For example, over the last 12 months, the coal miner has paid out dividends per share of 96 cents.

Based on the current New Hope share price of $5.94, this equates to a whopping 16% trailing dividend yield.

To put that into context, a $10,000 investment in its shares would have yielded $1,600 in dividends.

But when something looks too good to be true, it often is. Is that the case with New Hope shares? Is it actually a dividend trap?

Are New Hope shares a trap?

Unfortunately, if analysts at Goldman Sachs are on the money with their forecasts, investors could be looking at major dividend cuts from New Hope in the near term.

For example, its analysts are expecting a 23 cents per share final dividend from the coal miner when it releases its FY 2023 results in the coming weeks. This is down 59% on the 56 cents per share final dividend New Hope paid out last year and will bring its full-year dividend to 63 cents per share.

But the cuts won't stop there according to Goldman.

More cuts ahead

The broker has pencilled in a 33 cents per share dividend for FY 2024, which implies a 58% cut on its estimate for the current financial year.

Based on where New Hope shares are currently trading, this will mean a fully franked 5.5% dividend yield. And while this is still very attractive, it pales in comparison to its trailing dividend yield.

In addition, it is worth highlighting that Goldman Sachs has a sell rating and a $3.30 price target on New Hope's shares. This suggests that its shares could fall approximately 45% from current levels.

All in all, it's fair to say that this coal miner currently has the hallmarks of being a dividend trap.

Should you invest $1,000 in Web Travel Group Limited right now?

Before you buy Web Travel Group Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Web Travel Group Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Dividend Investing

A man in a suit looks serious while discussing business dealings with a couple as they sit around a computer at a desk in a bank home lending scenario.
Dividend Investing

Forget term deposits and buy these ASX dividend shares in May

Analysts think these income options would be top picks for investors.

Read more »

Miner holding cash which represents dividends.
Dividend Investing

Invested $8,000 in Fortescue shares 5 years ago? Guess how much passive income you've banked!

Fortescue is popular among passive income investors for paying two fully franked dividends per year, even during COVID.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Dividend Investing

Hunting for passive income? Here's everything you need to know about the latest NAB dividend

NAB revealed its interim dividend payout this morning.

Read more »

A couple makes silly chip moustache faces and take a selfie on their phone.
Dividend Investing

I think these 2 high-yield ASX dividend shares are buys in May

These businesses offer significant passive income.

Read more »

Wife and husband with a laptop on a sofa over the moon at good news.
Dividend Investing

2 ASX dividend stocks to buy for juicy 5% to 8% yields

These shares are being named as buys for income investors by brokers.

Read more »

Man pointing an upward line on a bar graph symbolising a rising share price.
Dividend Investing

3 growing ASX dividend shares to buy and hold

Analysts are feeling positive about these shares. Let's see what they are forecasting for them.

Read more »

Joyful woman at a beach on the Gold Coast with her arms spread out.
How to invest

How to bank $10,000 a year in passive income from these 3 top ASX shares

Here’s how I’d go about building a $10,000 passive income stream from these top ASX stocks.

Read more »

A woman relaxes on a yellow couch with a book and cuppa, and looks pensively away as she contemplates the joy of earning passive income.
ETFs

3 ASX ETFs to buy for passive income in May

Don't like stock picking but want passive income? Here are three funds that could help you.

Read more »