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BHP Billiton Plc (BBL)(BHP) Stock Analysis

BHP Billiton Plc (BBL), together with its subsidiaries, operates as a diversified natural resources company worldwide. This international dividend achiever has increased dividends for 13 years in a row.

The company’s last dividend increase was in August 2012 when the Board of Directors approved a 3.60% increase in the semi-annual distribution to $1.14 /share. The company’s peer group includes Rio Tinto (RIO), Vale (VALE) and Anglo-American (AAUKF).

Over the past decade this dividend growth stock has delivered an annualized total return of 19.60% to its shareholders.

The company has managed to increase EPS from $0.62/share in 2003 to $5.77 by 2012. Analysts expect BHP Billiton to earn $5.54 per share in 2013 and $5.70 per share in 2014.

The return on equity has oscillated wildly between 15% and 50%. Between 2003 and 2007, it rose from 15% to 49%, followed by a drop to 15% in 2009. By 2011 it bounced back up above 45%, before tumbling to 25% in 2012. I generally want to see at least a stable return on equity over time.

Over the past decade, BHP Billiton has managed to substantially boost distributions. In 2003 the company paid 29 cents/share, which has increased to $2.20/share by 2012. At the new rate of $1.14/share, the annual dividend is $2.28/share.

The dividend payout ratio has mostly remained below 50%, with the exception of a brief spike in 2009. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Currently BHP Billiton PLC is attractively valued at 12 times earnings, yields 3.30% and has a sustainable distribution. I do not believe in diversifying for diversification sake. However, given the fact that the company is simply a price taker participant in a commodities industry, the most I can rate the stock is a hold.

Full Disclosure: None

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Diversified Dividend Portfolios – Don’t forget about quality

This article was written by Dividend Growth Investor. If you enjoyed this article, please subscribe to my feed [RSS], or have future articles emailed to you [Email] or follow me on Twitter [Twitter].