So, each 1c drop in AUD vs USD results in:
A. increase of $100M USD (BHP reports in USD) in profits
plus
B. about 1/93 rd (i.e. 1.1% of div value) increase in divs for AUD shareholders (BHP divs are declared in USD, then converted to AUD when paid).
So, the way I think of devaluation of AUD and BHP is that:
A. (the USD profit effect) helps offset iron ore price drop ("helps" as it won't nearly be enough by itself; volume increases, and cost reductions are also much-needed helpers)
B. (the AUD div effect) is my bonus as an Australian shareholder.
In dividend terms, BHP FY14 divs of USD1.21 converted to AUD130.92 (effective exchange rate of 0.9242.
At the current exchange rate of 0.87 (about 6% lower), I would get AUD1.39 (6%more), for div yield of 4.15% FF (5.93% GUP) on current SP of $33.50.
At a possible exchange rate of 0.80, I would get AUD1.51 (15%more), for div yield of 5.51% FF (6.44% GUP) on current SP of $33.50.
All off this on FY14 declared divs of course, but BHP have a strong "progressive dividend" policy, and a big margin of safety in their payout ratio, and stated intention to return more to shareholders.
So I am looking forward to my "bonus" div as AUD drops!
As overseas shareholders sell and SP drops, BHP becomes better buying for AU shareholders.
DYOR of course
BHP Price at posting:
$33.46 Sentiment: Buy Disclosure: Held
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