Shares in BHP Billiton yield 7.8 per cent. Royal Dutch Shell returns 7.9 per cent. Both companies have pledged to keep paying, or even increase, their dividends. Total of France has gone further, with the finance director describing its dividend as the “cornerstone of everything we are doing”. Its shares yield over 7 per cent.

In a world that’s desperate for income, why are the shares in these big, solid resources companies so depressed? It’s obvious that their profits are down, as yesterday’s shortage becomes today’s glut. Projects which looked fine at $100 a barrel or $80 a tonne for iron ore are not worth doing at half price.

Managements are shelving spending while attacking the bloated cost base left over from the boom. Yet under the cosh from shareholders, they seem to have forgotten that dividends should be paid out of earnings. Today they cannot see even the near-term future for commodity prices, let alone make plausible profit projections for 2016.

A dividend yield is only worth the name if the payout is sustainable for many years ahead, and these yields say it’s not. Of course the market has been wrong many times before, and today’s prices may represent a splendid buying opportunity – but don’t believe those payments are anything other than a clandestine return of capital.

Rights and wrong targets

The Iinvestment Association was frightfully upset. “A serious and unnecessary breach of the principles” it harrumphed, “an action which fell short of the standards expected by institutional investors.” The target of all this displeasure is, inevitably, Glencore, the stumbling commodities trader.

At its annual meeting in May, Glencore pledged to stick with the rules about offering new shares to existing shareholders, the so-called pre-emption rights. It then won permission to issue 10 per cent to outsiders, standard practice to finance smaller acquisitions.This month, Glencore’s management finally woke up to the credit precipice in front of it and instead used the 10 per cent to raise £1.6bn in a “cash box” issue.

The senior execs all subscribed to maintain their stakes – perhaps remembering how much they sold at 530p a share on flotation just three years ago – but many other shareholders were shut out. Glencore and its advisors decided that a rights issue was too difficult, given the rising sense of panic over the company’s finances.

More to the point, institutional greed and an informal cartel have effectively destroyed the rights issue as an attractive way to raise finance, because the underwriters insist on a massive discount on the new shares as well as a fee. Last week, for example, BBA Aviation paid underwriters for a rights issue at a 53 per cent discount.

The trade bodies would do better to examine the cost of deals like this than to bleat about the Glencore placing. Mind you, they now look like harrumphing chumps. Those shares, placed at 125p, can be bought for 101p.

The £24bn cost of saving face

Never underestimate how far politicians will go to avoid looking foolish. In the case of the Chancellor, it’s as far as the uttermost parts of China, in a sucking-up process that promises us the world’s most expensive electricity.

Hardly anyone without a vested interest thinks Hinkley Point C is a good idea. In desperation, the government has had to offer the Chinese a £2bn guarantee and EDF a fixed price rich enough to pay the bonuses of the next generation of derivatives traders.

If EDF actually completes – the two reactors it’s building are not encouraging precedents – the juice from Hinkley will cost twice today’s wholesale price – while Peter Atherton at Jefferies calculates the capital cost at £6.9m per megawatt compared to £0.5m for gas.

Amber Rudd’s golden opportunity to blame her Lib-Dem predecessors as energy secretaries and scrap it has long gone. Now she is obliged to defend the indefensible. Next month, pegged to the visit of the Chinese president, the project’s finance is to be signed off, and even Xi Jinping will struggle to keep an inscrutible face. If we ever learn the true impact of this £24bn monster on our electricity bills, just consider it a contribution to the Amber Rudd memorial fund.

This is my FT column from last Saturday

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