BHP Billiton plc’s Dividend Prospects For 2014 And Beyond

Many top FTSE 100 companies are currently offering dividends that knock spots off the interest you can get from cash or bonds.

In this festive series of articles, I’m assessing how the companies measure up as income-generators, by looking at dividends past, dividends present and dividends yet to come.

Today, it’s the turn of mining titan BHP Billiton (LSE: BLT) (NYSE: BBL.US).

Dividends past

The table below shows BHP Billiton’s five-year earnings and dividend record.

  2008/9 2009/10 2010/11 2011/12 2012/13
Statutory earnings per share (EPS) 106¢ 229¢ 429¢ 290¢ 204¢
Dividend per share 82¢ 87¢ 101¢ 112¢ 116¢
Dividend growth 17.1% 6.1% 16.1% 10.9% 3.6%

As you can see, BHP Billiton has delivered overall strong — if a little erratic — dividend growth through the last five years. The average annual increase works out at an impressive 10.8% — far ahead of inflation.

Mining companies’ earnings can be volatile from year to year, as they’re hostage to metals prices that are beyond their control. As such dividend cover can also be variable. Nevertheless, over the five-year period, BHP Billiton’s total dividend payout of 498¢ a share was covered a healthy 2.5 times by EPS. For the latest year — a tough one for miners generally — dividend cover was 1.8.

An excellent dividend performance, continuing the company’s exemplary record of increasing the payout through good times and bad.

Dividends present

BHP Billiton has an unusual 30 June financial year-end. As such, the 2012/13 results are in, but the 2013/14 year isn’t yet underway as far as dividends are concerned.

At a share price of 1,845p, BHP Billiton’s 2012/13 dividend of 116¢ (75.82p in sterling) represents a yield of 4.1%.

Dividends yet to come

Analysts see mid-single-digit dividend growth for 2013/14, with the payout rising to 122¢. The consensus forecast for underlying EPS is 258¢ (up 16% on 2012/13’s underlying number), giving dividend cover of 2.1.

Looking ahead to 2014/15, the analysts see further mid-single-digit dividend growth, with a payout of 129¢ pencilled in. The consensus EPS forecast is for a 7% rise to 276¢, maintaining the 2.1 times dividend cover.

The analysts’ EPS forecasts do vary widely around the consensus — much depends on their view of metals prices — but dividend forecasts are more closely clustered.

Shareholders can be optimistic about dividend progress moderately ahead of inflation in the near term, with the prospect of periods of stronger growth during punchier phases of the mining cycle.

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> G A Chester does not own any shares mentioned in this article.