...whether it is Oct 2024 or June 2025, BHP's Archilles heal beckons, and it may need a lot of cash.
...today, BHP cut dividends to preserve cash, inferred as money set aside for acquisitions, but it could also be money set aside for this coming UK class action suit that everybody conveniently forgot and minimised by the company.
BHP shareholders will take a 14 per cent dividend cut in a fresh sign the acquisitive miner is reserving a greater proportion of earnings for growth bets.
Investors will receive a US74¢ ($1.09) final dividend after BHP posted a slightly better than expected $US13.7 billion underlying profit on Tuesday.
When added to February’s interim dividend, BHP shareholders will receive $US1.46 a share for 2023-24, lower than the $US1.70 paid to investors last year.
The dividend cut came despite a 3 per cent rise in annual revenue and a 2 per cent rise in underlying profit. But a slew of impairments, including against BHP’s Australian nickel mines, meant net profit was 39 per cent lower at $US7.89 billion.
Tuesday’s result also marked the third sequential decline in BHP’s dividend payout ratio. BHP’s policy is to return at least half of underlying profit to shareholders.
The company has traditionally paid more than the minimum 50 per cent since the policy was adopted in 2016; shareholders received 64 per cent of earnings as dividends last year, 77 per cent in the previous year and 89 per cent in 2020-21. But the dividend payout ratio for 2023-24 was much lower at 54 per cent.
BHP chief executive Mike Henry described the result as “robust” and vowed to maintain “strong cash returns to shareholders through the cycle”.
BHP’s capital spending on bets like Canada’s Jansen potash project is expected to top $US10 billion this year, before rising toward $US11 billion per year in the “medium term”.
Under Mr Henry, BHP has also explored dealmaking. BHP paid $9.6 billion to acquire OZ Minerals in May last year, and last month pledged to spend about $3.2 billion acquiring Argentinian copper assets controlled by the Lundin family.
In between those two deals, BHP also made an audacious and unsuccessful $75 billion bid to acquire diversified miner Anglo American.
Analyst consensus measured by Visible Alpha had pointed to BHP reporting a $US13.5 billion underlying profit on Tuesday and total dividends of $US1.46 for 2023-24.
BHP is not the only ASX-listed miner choosing to spend its spare cash on growth rather than maximise shareholder returns; Yancoal suffered a dramatic share price slump last week when it suspended its dividend ahead of possible coal acquisitions.
