We reiterate our Outperform recommendation on BHP Billiton Ltd. (BHP) based on its progressive dividend policy and its joint venture with Rio Tinto PLC (RTP).
BHP Billiton maintains a progressive dividend policy with a dividend of 42 cents per share in the first half of fiscal 2010, up from 41 cents in the first half of fiscal 2009. In fiscal 2009, dividend was 82 cents, an increase of 17.1% year over year. A continuous growth in dividend raises shareholder value that inspires our optimism about the stock and its Outperform rating.
The ongoing investment program continues to deliver volume growth. In December 2009, BHP Billiton and Rio Tinto concluded definitive agreements to establish the Western Australia Iron Ore Production joint venture. These agreements are a milestone in delivering significant additional value to the shareholders.
Also, BHP recently delivered the first production in three major projects (iron ore, alumina and energy coal) and in the first half of fiscal 2010 it approved the Hunter Valley Energy Coal (Australia) MAC 20 project for a total of $260 million, whose initial production is expected to start by the first half of 2011.
Though BHP expects the market uncertainty to continue in the short to medium term, it is confident that the ongoing industrialization in China and other developing economies will drive the long-term demand for its products. The first half of fiscal 2010 bears evidence of the fact when demand and prices improved due to strong recovery in China and India.
BHP Billiton has a competitive advantage in this uncertain environment based on its diversified portfolio of low cost and high quality assets. The company is well positioned to benefit as the markets recover.
Read the full analyst report on “BHP”
Read the full analyst report on “RTP”
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