From the AFR:
But Brad Potter, head of Australian equities at BHP shareholder Nikko Asset Management, said that the dividend policy was a “travesty”.
“It wouldn’t surprise me if they accepted a credit downgrade instead of cutting the dividend,” Mr Potter told Fairfax Media.
The miner has got itself caught in a progressive dividend “bear trap” but it was unlikely to be able to scrap the policy until the next mining boom, because a backflip would be “embarrassing”.
“This is a position they have got themselves into,” he said, adding that the same applied to fellow miner Rio Tinto.
“A cyclical company should not be running a progressive dividend policy.”
No, it shouldn’t and it will use the credit card for a while, I suspect. But I wouldn’t worry, in the medium term when iron ore falls below BHP breakeven costs it will have no choice but to cut everything in sight.
Hence BHP’s (and RIO’s) bear trap is investor’s bull trap.
