BHP Billiton (LSE: BLT) has seen its share price crash by 56% since February 2015, to 673p, on the back of plunging earnings thanks to the commodities crisis — EPS fell 52% in the year to June 2015, and analysts have a further 59% drop forecast for the current year.

Yet against a backdrop like that, BHP shelled out for a 6.8% dividend yield in 2015, which was not covered by earnings. And the City pundits are talking of a massive 9.8% yield for the current year, which would be two and a quarter times forecast earnings!

Are they nuts? To be fair, the 2016 forecast has been cut back a little — three months ago they were predicting a handout that would have yielded 12% at today’s share price.

But in 2015’s full-year report, BHP said its “commitment to the progressive dividend is unchanged“, and upped it by 2% even though it was still carrying $24.4bn in net debts. Since then BHP has been somewhat occupied with the tragic dam failure at its part-owned Samarco Mineração iron ore operation in Brazil, but I’d like to see a more realistic approach to dividends — I just don’t see sense in effectively borrowing money to hand out to shareholders.

Cash from essentials

Now, the dividend policy at Centrica (LSE: CNA) makes a lot more sense to me. Centrica’s forecast yield for 2016 has also been boosted by a share price fall — a 23% drop to 212p has lifted it to 5.9%, which would be the highest it’s been in a few years.

Centrica also has a progressive dividend policy, but at the interim stage it made it clear that it is “in line with sustainable operating cash flow growth“. In fact, a decision to rebase the dividend due to a drop in earnings saw 2014’s payout cut to 13.5p per share (from 17p in 2013), and a further reduction to 12p for 2015 is on the cards before the expected uptick to the following year’s 5.9%.

Centrica is keeping its dividend covered around 1.4 to 1.5 times by earnings, which seems to me like the ideal compromise between progressive and prudent policies.

Cash from fashion

NEXT (LSE: NXT) shares were flying at the end of November, but a slightly disappointing update on 5 January (preceded by expectations of gloom) have precipitated a sell off that’s led to a drop back to 6,860p for a flat 12 months. The Christmas period wasn’t as strong as hoped, but I still see NEXT as the best in its sector.

In fact, NEXT has so much spare cash that it’s going to be handing chunks of it back to shareholders this year and next, with special dividends taking the yield for the year to January 2016 to 5% and then upwards to 5.3% a year later. Obviously we shouldn’t bank on levels like that every year, and in the longer term normal dividends should probably yield around 2.5% to 3%, but it’s a measure of a well-managed company performing strongly in a tough sector during difficult times.

On a forward P/E of 15 based on the next 12 months’ forecasts, I reckon NEXT has a continuing bright future.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.