Macquarie says BHP Billiton share price worth $40 after share buy-back

Does the BHP Billiton Limited (ASX:BHP) share price have another 25% upside?

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The BHP Billiton Limited (ASX: BHP) share price is flat today, but climbed 3.5% yesterday after the big iron ore miner announced it had completed a US$5.2 billion off-market share buy-back and would pay a US$1.02 per share dividend to all eligible shareholders on the register as at January 11, 2019.

The final buy-back price was set at A$27.62, which equalled a 14% discount to the 'market price' of $32.14. The total buyback represented 8.3% of the issued capital of BHP Group Limited.

According to reports in the Fairfax press analysts at Macquarie Group Ltd (ASX: MQG) are impressed with the buy-back price and think that "BHP could return a further US$3 billion to shareholders during the second half of the current financial year, most likely through an on-market buy back in the UK".

The sugar hits for BHP shareholders could keep coming then, with the A$1.42 per share FX-adjusted dividend representing a yield of 4.4% alone based on today's BHP share price of $32.14.

BHP is also due to pay an interim dividend this March and boasts that it has now already returned US$21 billion to shareholders over the past two years.

Elsewhere Rio Tinto Limited (ASX: RIO) is also rewarding shareholders due to the iron ore price rise with its own US$3.2 billion off and on-market share buyback.

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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