BHP hits 10-year low amid dividend fears – by Bryce Elder (Financial Times – January 12, 2016)

BHP looks certain to halve its dividend at full-year results next month, which would be its first cut in at least four decades, according to analysts.

The stock is, theoretically at least, the FTSE 100’s biggest income generator with a prospective yield of more than 10 per cent.

But BHP’s earnings are negative at spot prices, making a cut “inevitable”, said Barclays. Even a halved dividend will not be covered by free cash flow for at least three years, meaning deeper cost cutting is also required, it forecast.

HSBC also forecast BHP to cut by 50 per cent but also saw scope for acquisitions, such as buying Teck’s stake in the Antamina copper mine in Peru. Merrill Lynch last week argued that BHP should launch a pre-emptive rights issue to fund opportunistic acquisitions from distressed peers.

BHP ended 2.9 per cent lower at 617.9p as oil and mining stocks missed out on a wider market rally.

The FTSE 100 was up 1 per cent, ahead 57.41 points to 5,929.24, but was off its session highs as Brent threatened to break below $30 a barrel.

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