Dividends and BHP keeps $10.4 billion promise with combined buyback, special dividend

In the world of mining giants, BHP Billiton PLC is one of the biggest and on November 1st announced it was going to return to shareholders $10.4 billion. The money will come in the form of a special dividend – cash to existing shareholders and buying back outstanding shares.

The money came from the sale of its US shale business to BP PLC.

According to Sonali Paul of Reuters the announcement was greeted with cheers however there are critics. The cheers like the actions, however it says the company does not see opportunities to use some of the cash in other operations. The cheers come from those who saw miners buy a peak prices and now those assets are still worth lower values.

BHP’s Chief Executive Andrew Mackenzie noted BHP in the past 2 years has returned $21 Billion to shareholders. BHP trades on the Australian and British stock exchanges and the buyback applies to the Australian exchange. For institutional investors there are tax benefits to the Australian exchange over the British exchange.

Linking to dividend paying stocks, if you like miners, BHP is worth examining, if you buy before November 19 you will receive money for your shares which lowers the cost of your acquisition. With the company buying shares, this means the EPS will be lower and tend to increase to where it was before the announcement which means the shares should trade higher. No wonder investors are cheering.

There are more questions than answers, till the next time – to raising questions.

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