Looking out over the Australian mining industry, there aren't too many bright points of light encouraging investors.
Yet, if the worst is out of the way, it may be the time to ease back into the big miners that can weather a few more lean years.
I believe now may be the time to rethink BHP Billiton Limited (ASX: BHP) and the mining space – at least it may offer better dividend yields until the industry swings back to normal.
1) Share price movement
Despite all the gloom about iron ore, BHP is up about 24% from July 2013 lows. The great spike in mining activity has come and gone, so now we're back to normal. That's roughly what the share price levels are saying since the stock is back up to around $38, where it was late 2009 before the China iron ore boom. If you wait until everything is fine and perfect, the shares will have rallied by then.
2) Increased dividends
If Rio Tinto is in a position to return capital to appease shareholders, then maybe BHP will be also. Both planned to cut costs and give some of the savings back to the shareholders. Rio announced a 15% higher interim dividend with its results.
If BHP is going to raise its dividend, you should wish traders sell the stock off even more. The lower a stock's share price is, the higher its dividend yield will climb, especially when you add on more dividend income.
By the way, BHP does have a great record of raising dividends over the past five and ten-year periods.
3) North American shale oil
BHP's "four pillars" of production that it is building its future on includes petroleum. The shale oil investments made in the resource rich Texas shale oil regions in the US are just now starting to produce a good return.
Also nearby, Mexico is planning to change its energy industry laws and regulations to encourage better, more efficient oil production. The shale oil resource in Texas extends way into Mexico and BHP may be looking at what it could do over there as well. You shouldn't just concentrate on BHP's iron ore story, which only is about 30% of BHP's total revenues. Oil is coming up in the future.
