BHP for Income Investors?

BHP Billiton's progressive dividend policy underpins well-tested stability in distributions, highlighting it as an income idea

Mark Taylor 15 December, 2014 | 4:22PM
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Could BHP Billiton be an income investment idea? The planet's largest diversified miner has been hammered, down by one fourth from AUD 40 August highs. The current yield of about 4.6% fully franked is attractive in a company of BHP Billiton's high quality. Though earnings are cyclical, we believe yield can be maintained and is almost certain to grow in time.

BHP Billiton's progressive dividend policy underpins well-tested stability in distributions, highlighting it as an income idea. This is despite resource companies being cyclical, capital-intensive, and typically poor dividend payers.

 We think BHP Billiton is undervalued, with the market underestimating the resilience of earnings and growth options which come from long-life, low-cost, expandable assets. We are positive on the outlook for cost savings to support margins while the diversified business model offers a range of still-attractive investment options to drive growth, despite a less favourable price environment.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
BHP Group PLC2,058.50 GBP0.00Rating

About Author

Mark Taylor  is an equity analyst at Morningstar.