Should BHP freeze its dividend? – OPINION

Published at Jan 19, 2016, in Features

Ahead of its update release tomorrow, the question on its dividend policy has shifted from whether it can afford to drop its dividend policy to whether it can afford to keep it.

Australians have been investing in the big miner for years, and BHP has made sure the investment from shareholders (actually, more than likely the funds which hold the stock) has kept on flowing, partially by maintaining an attractive dividend policy.

The prevailing sentiment was that it was always wise to have some BHP in the cupboard, as in times of feast you’d get the upside of raging commodity markets while in times of famine, at least you’d have the dividend to keep you sustained.

The past year or so, however, commodities have taken a well-publicised tumble.

Earlier this month, it made the call to write down its investment in the US shale sector by $7.2 billion in the face of plunging oil prices.

Iran coming back to the international fold and starting trade again is hardly going to help matters in that regard, either.

To be fair, BHP has attempted to get out in front of its US investment going south rather than just lump it in with tomorrow’s operations update or February’s financial update.

That’s good corporate practice, and it should be applauded.

It noted that it’s already cut costs to the bone in its US business by operating only ‘wet’ assets, and that’s mainly so it can keep its foot on the acreage.

So there’s not a heck of a lot of room to cut spending. It may be able to cut future, theoretical spending, but the actual amount can’t actually be reduced that much further than it currently is.

The event was a timely reminder of just how much pressure is on its bottom line – and subsequently its dividend policy will be scrutinised by investors.

According to its 2015 annual set of books, BHP had cash equivalents of $6.7 billion. This was after paying out dividends for the year amounting to $6.6 billion.

However, with a stated position of wanting to progressively increase dividends and an expected drop in cash on hand associated with the downturn in commodities – it’s clear that something’s got to give.

With its cash on hand expected to reduce and its steadfast commitment to increasing dividends, it will have a cash shortfall to make up.

It can do this by either selling off assets or borrowing money – but it’s hardly a great look to be selling off assets or picking up debt in order to maintain a dividend.

BHP has said it will say something about its dividend policy in February, and it’s increasingly likely that BHP will seek to freeze dividend growth or maybe even trim it a touch.

The question is whether the market has already priced this in, or whether any moves on dividends will shock the market.

Any commentary on dividends tomorrow may just be read as readying the market for a big move.

Where to invest $1,000 right now

When the experts at Next Investors have a stock pick, it may pay to listen.

The Next Investors have been investing in ASX small cap stocks for years, with their best small cap picks yielding returns of 1,200%, 1,120%, 900% and 678%.

They have just revealed their hand-picked, FY2021 stock portfolio of high conviction long-term investments.

Click the link below to see what they are currently investing in.


S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

Australian ASX Small Cap stocks | Why is Australia’s leading small cap publication

Founded seven years ago, is Australia’s leading and longest standing website for investor and finance news, education and expert opinion.

Published by StocksDigital, Finfeed was created to report daily on the comings and goings of ASX listed stocks in the small cap market.

As the first digital publication dedicated specifically to this space, Finfeed soon became the most trusted publication in the market, quickly garnering over two million page views – a number that continues to rise. provides its readers with informative articles that tackle the latest in market moving #ASX small cap news, plus exclusive content you won’t find anywhere else. It is aimed at those with an interest in investing, market education, company performance, start-ups and much more. is the only media organisation operating under the strength of a Financial Services License and is backed by leading journalists and analysts all with brands of their own.

The website aims to inform, educate and entertain with content that drills down into the heart of financial matters.

Finfeed is a leading source of investor and market information, with everything investors need to know about how to invest written in a way that anyone can understand. 

Over the years, the website has expanded beyond exclusively reporting on small caps, to profile Australia’s leading ASX listed small, mid and large caps as well as some of the country’s most successful CEOs and business leaders to find out what makes them tick.

Every day you will find fresh content covering:

Fast Facts

Over 4,000 articles published

Over 2.3 Million Page Views and counting

Over 10,000 followers on social media

Subscriber list growing by 2% monthly

Thanks for subscribing!