BHP Billiton: A FTSE 100 Dividend-Raising Star

LONDON -- In an outcome that's tough on investors, the FTSE 100 (UKX) has failed to deliver a rising dividend payout over the last few years.

Just look at the iShares FTSE 100 ETF  (LSE: ISF.L  ) , for example. This is an exchange-traded fund that tracks the benchmark index, and we can see the aggregate payment from Britain's top 100 companies has yet to regain its pre-recession peak:

Year

2007

2008

2009

2010

2011

Dividend per share

19.1p

20.2p

17.1p

16.2p

18.1p

But some companies within London's premier index have performed well on dividends, despite these austere times, and this series aims to seek them out. One such name is BHP Billiton (LSE: BLT.L  ) (NYSE: BBL  )

The big question is can the company's dividend continue to out-perform its index. Let's take a closer look.

BHP Billiton is a resources company. With the London-listed shares at 1916 pence, the market cap is £40,442 million. This table summarizes the company's recent financial record:

Year to June

2008

2009

2010

2011

2012

Revenue ($m)

59,473

50,211

52,798

71,739

72,226

Net cash from operations ($m)

17,817

18,863

16,890

30,080

24,384

Adjusted earnings per share (cents)

274.9c

192.7c

224.1c

393.5c

321.6c

Dividend per share (cents)

70c

82c

87c

101c

112c

So, the dividend has increased by 60% during the last five years -- equivalent to a 12.5% compound annual growth rate.

With around 100,000 employees and contractors, and operations in more than 100 locations globally, BHP Billiton is among the world's largest producers of major commodities such as aluminum, copper, coal, iron ore, manganese, nickel, silver, and uranium. The company also has substantial interests in oil and gas. The group is dual-listed on both the London and Australian stock exchanges.

Fluctuating commodity prices affect Billiton's profits as demand varies. While acknowledging that short-term volatility is likely to continue, Billiton's directors believe that world economic activity is engaged in a bumpy recovery. They also believe that China's continuing push for urbanization and industrialization will consistently bolster demand, going forward. If that outlook proves correct, the prospects for the dividend look promising.

BHP Billiton's dividend growth score
I analyze four different features of a company to judge whether its dividend can continue to rise:

1. Dividend cover: earnings covered the last dividend almost three times. 4/5

2. Net cash or debt: net gearing of 35% with borrowings around annual earnings. 4/5

3. Cash flow: cash flow supports profits but both have been falling. 3/5

4. Outlook and recent trading: satisfactory trading and a cautiously positive outlook. 4/5

Overall, I score Billiton 15 out of 20, which encourages me to believe the firm's dividend can continue to outpace dividends from the FTSE 100.

Foolish summary
Billiton seems poised to grow, with debt under control and generally good economic numbers. The outlook is reassuring.

Right now, the forecast full-year dividend is around 73 pence per share, which supports a possible income of 3.8%. That looks attractive to me.

BHP Billiton is one of several dividend out-performers on the London stock exchange. There's one man who's as keen as I am to find, and invest, in them. I suggest you read all about his best investment ideas now in this free, time-limited report, while you have the chance: "8 Income Plays Held by Britain's Super Investor." This free report analyzes the £20 billion portfolio of legendary high-yield expert Neil Woodford. Click here to discover his favorite dividend opportunities with good growth potential.

Kevin Godbold owns shares in BHP Billiton. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2119949, ~/Articles/ArticleHandler.aspx, 9/18/2014 11:53:21 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement