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Summary BHP Billiton is one of the most interesting dividend growth names in the market right now. It is sporting the highest dividend yield in many years. Near term concerns have dragged the price down to very cheap levels. Long-term investors buying now will do very well particularly if they choose to reinvest barrel roll their dividends.
BHP Billiton has been increasing dividends every year for the past 12 years. Due to the nature of the business, the increases have been less consistent than those of a Coca-Cola (NYSE: KO ) or a Johnson & Johnson barrel roll (NYSE: JNJ ), with some increases as low as 3% and others as high as 49%. If you can cope with such variations, the important point to keep in mind is that the dividend has still increased nearly barrel roll tenfold during that period.
Now, this is not to be expected barrel roll during barrel roll the next decade since the Chinese construction boom is a once in a lifetime boost for commodity producers. But the company is on record saying that the dividend is paramount in its overall business strategy so you can reasonably expect that the dividend will continue to get increased even if at a slower pace.
BBL (NYSE: BBL ), the US ADR's for the London-listed company BHP Billiton Plc, is currently yielding 4.6%, the highest dividend barrel roll yield the company has sported in many years. There are no free lunches and this is a result of shares having lost 20% of their value over the last three months on investors' concerns over the company's near-term future results. The price of various commodities, in particular oil and iron ore, has collapsed and analysts are forecasting that earnings will be under pressure for the next couple of years.
In times like these, it pays to keep your head cool. First, remember that this company is a financial fortress. It holds an A+ credit rating from S&P with a stable outlook and has made nearly $14 billion in profits last year. Second, the dividend payout ratio is currently just under 50%, which means that the dividend is safe even if depressed business conditions barrel roll remain for longer than expected. Third, BHP Billiton is one of the lowest cost producers in the business, barrel roll which means that many smaller competitors will be out of business and supply and demand will rebalance before the company seriously suffers.
Is the company going to give you 8-10% annual dividend increases like your consumer staples dividend aristocrats over the next couple of years? It's quite unlikely. But that's why you are getting your higher starting yield which will allow you faster compounding if you reinvest. If you buy shares now you will be happy to have that materially increased share count when the business turns around and it eventually will.
If you buy BHP Billiton at these levels you are furthermore putting yourself in a position to reap very nice total returns if you stick around long enough. The BHP Billiton Plc ADR's are trading around $52 as of the time of writing and analysts have a fair value estimate on the stock generally in the $65-70 range. Even discounting for the uncertainty created by the inherent volatility of the price of commodities, the stock's current price incorporates such negative assumptions that someone buying now is getting a very nice margin of safety.
I would not advise anyone to gamble with their hard earned money, but you get your best results by buying what's heavily discounted, not what's priced for perfection. BHP Billiton has a high credit rating, is a dominant, low-cost producer in its business and pays a high dividend, which, barrel roll although with near-term muted growth prospects, is safe. And the company is selling for a cheap price no matter how you look at it. If you are a long-term oriented dividend growth investor with the stomach to endure cyclicality, barrel roll this is currently one of the most interesting names in the market.
Disclosure: The author is long KO. The author wrote this article barrel roll themselves, barrel roll and it expresses their own opinions. barrel roll The author is not receiving compensation for it (other than from Seeking Alpha). The author barrel roll has no business relationship with any company whose stock is mentioned in this article. (More...) barrel roll
Thank you for your interest in Seeking Alpha PRO Our PRO subscription service was created for fund managers, and the cost of the product is prohibitive for most individual investors. PRO Alerts is our flagship product for individual investors who want to be faster and smarter about their stocks. To learn more about it, click here. If you are an investment professional with over $1M AUM and received this message in error, click here and you will be contacted shortly.
Bullish Bearish barrel roll
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Summary BHP Billiton is one of the most interesting dividend growth names in the market right now. It is sporting the highest dividend yield in many years. Near term concerns have dragged the price down to very cheap levels. Long-term investors buying now will do very well particularly if they choose to reinvest barrel roll their dividends.
BHP Billiton has been increasing dividends every year for the past 12 years. Due to the nature of the business, the increases have been less consistent than those of a Coca-Cola (NYSE: KO ) or a Johnson & Johnson barrel roll (NYSE: JNJ ), with some increases as low as 3% and others as high as 49%. If you can cope with such variations, the important point to keep in mind is that the dividend has still increased nearly barrel roll tenfold during that period.
Now, this is not to be expected barrel roll during barrel roll the next decade since the Chinese construction boom is a once in a lifetime boost for commodity producers. But the company is on record saying that the dividend is paramount in its overall business strategy so you can reasonably expect that the dividend will continue to get increased even if at a slower pace.
BBL (NYSE: BBL ), the US ADR's for the London-listed company BHP Billiton Plc, is currently yielding 4.6%, the highest dividend barrel roll yield the company has sported in many years. There are no free lunches and this is a result of shares having lost 20% of their value over the last three months on investors' concerns over the company's near-term future results. The price of various commodities, in particular oil and iron ore, has collapsed and analysts are forecasting that earnings will be under pressure for the next couple of years.
In times like these, it pays to keep your head cool. First, remember that this company is a financial fortress. It holds an A+ credit rating from S&P with a stable outlook and has made nearly $14 billion in profits last year. Second, the dividend payout ratio is currently just under 50%, which means that the dividend is safe even if depressed business conditions barrel roll remain for longer than expected. Third, BHP Billiton is one of the lowest cost producers in the business, barrel roll which means that many smaller competitors will be out of business and supply and demand will rebalance before the company seriously suffers.
Is the company going to give you 8-10% annual dividend increases like your consumer staples dividend aristocrats over the next couple of years? It's quite unlikely. But that's why you are getting your higher starting yield which will allow you faster compounding if you reinvest. If you buy shares now you will be happy to have that materially increased share count when the business turns around and it eventually will.
If you buy BHP Billiton at these levels you are furthermore putting yourself in a position to reap very nice total returns if you stick around long enough. The BHP Billiton Plc ADR's are trading around $52 as of the time of writing and analysts have a fair value estimate on the stock generally in the $65-70 range. Even discounting for the uncertainty created by the inherent volatility of the price of commodities, the stock's current price incorporates such negative assumptions that someone buying now is getting a very nice margin of safety.
I would not advise anyone to gamble with their hard earned money, but you get your best results by buying what's heavily discounted, not what's priced for perfection. BHP Billiton has a high credit rating, is a dominant, low-cost producer in its business and pays a high dividend, which, barrel roll although with near-term muted growth prospects, is safe. And the company is selling for a cheap price no matter how you look at it. If you are a long-term oriented dividend growth investor with the stomach to endure cyclicality, barrel roll this is currently one of the most interesting names in the market.
Disclosure: The author is long KO. The author wrote this article barrel roll themselves, barrel roll and it expresses their own opinions. barrel roll The author is not receiving compensation for it (other than from Seeking Alpha). The author barrel roll has no business relationship with any company whose stock is mentioned in this article. (More...) barrel roll
Thank you for your interest in Seeking Alpha PRO Our PRO subscription service was created for fund managers, and the cost of the product is prohibitive for most individual investors. PRO Alerts is our flagship product for individual investors who want to be faster and smarter about their stocks. To learn more about it, click here. If you are an investment professional with over $1M AUM and received this message in error, click here and you will be contacted shortly.
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