The metals and mining company is hoping to shore up cash as commodity prices plunge on weakened demand from China.
"I think it's the right decision for the time being," Leila Almeida, head analyst at Rio-based investment consultancy Lopes Filho & Associados, told the Wall Street Journal. "No company can give itself the luxury of paying dividends to shareholders if that means bleeding cash."
Scrapping dividends allows mining companies to better pay down debt, close unprofitable businesses and invest in existing facilities, according to the Journal. Analysts point out that the companies will need as much cash as possible in upcoming years to pay down debt accrued during the boom years.
As Vale gains a better sense of the market's outlook as the year progresses, its board might "decide on the distribution of some remuneration to shareholders, provided that there is sufficient cash flow generation," Vale wrote in a statement.
Separately, TheStreet Ratings team rates the stock as a "sell" with a ratings score of D.
Vale's weaknesses include its disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
You can view the full analysis from the report here: VALE
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.