Shares in BHP Billiton Limited (ASX: BHP) are sliding again as the Fairfax press reports that analysts at Credit Suisse think the giant miner should axe its dividend in half to strengthen its balance sheet.
That would mean an end to BHP's progressive dividend policy whereby the miner committed to at least maintain or raise dividends on an annual basis. However, that commitment was made prior to the great commodities crash (GCC) of 2015 as China's slowing demand for iron ore and other metals coincided with the oversupply of oil markets to create a perfect storm for BHP and its investors.
The miner paid an FX-adjusted dividend total of around 168 cents per share in the last financial year which means if that were cut to an FX-adjusted 84 cents per share in the year ahead BHP would still be digging up a fully franked forward yield around 4.94%.
That's attractive, but likely to be small consolation to investors who have witnessed the value of their shareholdings collapse in half over the past nine months including the value of any shares transferred under the spin-off of South32 Ltd (ASX: S32).
Anyone holding BHP Billiton, South32 or rival iron ore miner Rio Tinto Limited (ASX: RIO) would likely have to take a long-term view given the weak outlook for metals prices as China's days of an unprecedented construction and infrastructure boom are over, with few catalysts on the horizon to suggest a demand uplift for commodities like iron ore.
In fact you might be better off forgetting BHP..
