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BHP [JSE:BHP] shareholders are in for another big dividend payout - the second-highest in the company’s record, thanks to surge in profits on the back of strong iron ore prices, lower debt levels and good performance of the group’s investments.
The world’s biggest diversified miner announced in a statement on Tuesday morning that its board approved an interim dividend of US$3.3 billion (R49.7 billion) or 65 US cents per share, which is above the company’s 50% minimum dividend payout policy. The interim dividend represented an additional US$700m or 14 US cents per share above the minimum mandated by the group’s policy, pushing the company’s payout ratio to 63%.
The mining group has its primary listing London Stock Exchange, and a number of secondary listings, including on the JSE.
BHP paid out a record dividend in August last year, giving back US$3.9 billion (R58.9 billion) to shareholders. This was in addition to $17 billion (R256 billion) already announced for the financial year that ended in June.
"The dividend reflects the solid cash flow generated in the period, caution due to near term market volatility driven by the 2019 coronavirus disease outbreak, trade policy and geopolitics, and our preference for net debt to be at the bottom end of the US$12 to US$17 billion target range," read BHP’s commentary that explained the high dividend payout.
Good shape
Except for 2016 when there was dramatic fall in commodity prices, BHP has generated a least US$15 billion (R226 billion) in net operating cash flow every year over the last decade, making it easy for the company to fund expansion and return capital to shareholders. CFO Peter Beaven said over the past four years, BHP has returned US$33 billion (R497 billion) to shareholders, including the dividend announced on Tuesday.
"That’s around a quarter of our current market capitalisation and this excludes the demerger of South32," said Beaven.
Looking forward to 2020 and 2021, new CEO Mike Henry, who was appointed in January, said BHP was in good shape and despite near term uncertainty due to geopolitical developments and the coronavirus outbreak; BHP believed that its strong balance sheet and high quality assets will help it continue delivering “exceptional financial and operational performance”.
"We see enormous potential to reliably deliver sector-leading operational performance, financial returns and social value in the years ahead. Our foundations are strong and performance momentum is with us,"said Henry.
In the six months to December, BHP increased profit from operations by 13.7% to US$8.3 billion (R123 billion) from US$7.3 billion (R110 billion) in December 2018, largely as a result of higher iron ore prices, operational stability and favourable exchange rate movements. The company said some setbacks it experienced during this period were lower volumes because of planned maintenance. Inflation movement and increase in stripping related costs at its cooper mine, Escondida also offset higher performance from other operations.
In the next year, BHP said it has two major projects expected to achieve first production within the next 12 months. It will be continuing with exploration programmes in gas, petroleum and copper.
