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
|
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
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.
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