After cutting its annual shareholder payout mining giant BHP (BHP) has offered another indication there are unlikely to be dividend ‘safe havens’ for income investors in the mining sector.

The company declared a final dividend of 55 cents per share, taking its total dividend for the year to 30 June 2020 to $1.20 per share, equating to a 5% yield, down 10% from $1.30 per share a year ago. The company also paid a special dividend in 2019.

An investor with £10,000 worth of BHP shares will have received around £50 less in ordinary dividends this year compared to last year. Consensus dividend forecasts for the June 2021 financial year imply a further reduction to $1.14 per share.

Link Group, authors of the UK Dividend Monitor, called the cut ‘unalloyed bad news’ for shareholders but pointed out with dividend cover already low last year at 1.2 times, a cut was hard to avoid. Dividend cover above two times is generally considered to provide a measure of safety.

The cut was something of a surprise given BHP’s net debt came in at $12 billion, right at the bottom of its target range of $12-17 billion, though Link points out that trimming this year’s shareholder payout is set to save BHP around £800 million in 2020 alone.

Shore Capital analyst Yuen Low says the lower ‘if still quite decent’ dividend is ‘disappointing’, but puts it in the context of last year’s ‘wonderful’ and ‘very generous’ payout.

Among the other FTSE 100 miners, only Rio Tinto (RIO) has maintained or increased its dividend, increasing its interim payout by 3% as China’s economic recovery boosted demand in its iron ore division.

Swiss miner Glencore (GLEN) scrapped its dividend entirely after taking a big hit on the value of its coal assets, while BHP has joined Anglo American (AAL) in cutting its payout, with the latter halving its interim dividend as demand in the diamond sector during the coronavirus pandemic has collapsed to virtually nothing.

It comes as BHP reported lower annual revenue and profit as a result of lower commodity prices – particularly coal, copper and petroleum – during the period and mine closures as a result of the pandemic.

Pre-tax profit for the 12 months to 30 June dropped 10% to $13.51 billion, with revenue declining 4.3% to $42.39 billion and missing company-compiled expectations of $43.07 billion.

Under pressure from investors, BHP also announced it has committed to exiting thermal coal production within two years, looking to sell its thermal coalmines as it transitions to commodities for a low carbon future.

The move will satisfy investment criteria laid down by Norway’s Government Pension Fund Global, which owns around 3.8% of BHP’s London-listed shares.

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