Trevor Sykes is back with more bad analysis today, this time on BHP:
For a normal industrial company or bank that would be questionable policy. But BHP is a different beast. To understand its dividend policy you need to look at its cashflow, simplified in the accompanying table.
The important point is that its investing outflow is largely voluntary. The net investment of $US13.2 billion in 2014-15 was almost entirely mine acquisitions, mine expansions and exploration. If it wished, BHP could stop investing altogether for a year and chairman Jac Nasser would be knocked over by the wall of money pouring into the vaults.
As it is, BHP’s current planned major capex, totalling $US6.6 billion, comprises $US3.8 billion to prolong the life of the great Escondida copper mine in Chile, half a billion on the Longford gas plant in Victoria and $US2.6 billion earmarked for the Jansen potash project in Canada.
The full text of this article is available to MacroBusiness subscribers
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
For a normal industrial company or bank that would be questionable policy. But BHP is a different beast. To understand its dividend policy you need to look at its cashflow, simplified in the accompanying table.
