Join our community of smart investors

BHP funnels cash surge to dividends

After a strong half-year for all of its main commodities, BHP Billiton is stepping across the gauntlet thrown down by peer Rio Tinto
February 21, 2017

London's two largest miners are again locked in a duet of 'Anything You Can Do' this results season. After a strong rebound in each of its four main commodities in the second half of 2016, BHP Billiton (BLT) this week announced it would reward shareholders with a 10¢-a-share dividend bonus on top of a 30¢ interim payout equivalent to 50 per cent of underlying profits.

IC TIP: Hold at 1408p

Just a fortnight ago, peer Rio Tinto (RIO) elected to pass on a similar proportion of underlying profits to its investors - with the added kicker of a $500m (£401m) share buyback scheme over the course of 2017. Not to be outdone, BHP used its half-year results to commit to a repurchase plan of its own, in the shape of a tender offer for as much as $2.5bn of bonds set to mature between next year and 2023.

Such one-upmanship is a far cry from the position a year ago, when BHP and Rio abandoned their progressive - and ultimately unsustainable - dividend policies. Yet despite six months of trading in which BHP's underlying operating profits more than quadrupled, caution is still the watchword when it comes to global commodity demand. The in-house view is that China's economic growth will moderate in 2017, leading to a "cooling of growth rates in the housing and automobile markets in combination with a continuation of strength in infrastructure". The outlook for the US, meanwhile, is seen as both "uncertain" and "unclear... notwithstanding infrastructure related announcements".

The direction and force of those economies' shifts will have a key bearing on the copper price, which at an average of $2.41 per pound in BHP's first half was 13 per cent up on the last financial year. However, the company is failing to benefit from even larger gains since, due to ongoing strikes at Escondida. Consequently, full-year production guidance from the world's largest copper mine is currently under review, even if BHP thinks it can maintain cash costs at $1 a pound.

Before these results, analysts at Canaccord Genuity were guiding for net income of $7.7bn and adjusted EPS of $1.44 for the June year-end, rising to $8bn and $1.50 in 2018.

 

BHP BILLITON (BLT)

ORD PRICE:1,408pMARKET VALUE:£82.7bn
TOUCH:1,407-1,408p12-MONTH HIGH:1,519pLOW: 679p
DIVIDEND YIELD:3.1%PE RATIO:37
NET ASSET VALUE:1,064¢*NET DEBT:32%

Half-year to 31 DecTurnover ($bn)Pre-tax profit ($bn)Earnings per share (¢)Dividend per share (¢)
201515.7-7.5-10716
201618.85.560.240
% change+20--+150

Ex-div: 9 Mar

Payment: 28 Mar

£1 = $1.24 *Reflects both UK and Australia-listed shares.