Is BHP Billiton plc (LON:BLT) A Smart Pick For Income Investors?

Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. BHP Billiton plc (LON:BLT) has returned to shareholders over the past 10 years, an average dividend yield of 4.00% annually. Let’s dig deeper into whether BHP Billiton should have a place in your portfolio. Check out our latest analysis for BHP Billiton

5 questions I ask before picking a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is it the top 25% annual dividend yield payer?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has dividend per share risen in the past couple of years?

• Is its earnings sufficient to payout dividend at the current rate?

• Will the company be able to keep paying dividend based on the future earnings growth?

LSE:BLT Historical Dividend Yield June 27th 18

Does BHP Billiton pass our checks?

The current trailing twelve-month payout ratio for BLT is 110.98%, which means that the dividend is not well-covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 69.32%, leading to a dividend yield of around 5.17%. Moreover, EPS should increase to $1.48, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.

Compared to its peers, BHP Billiton has a yield of 4.79%, which is high for Metals and Mining stocks.

Next Steps:

Keeping in mind the dividend characteristics above, BHP Billiton is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three pertinent aspects you should further research:

1. Future Outlook: What are well-informed industry analysts predicting for BLT’s future growth? Take a look at our free research report of analyst consensus for BLT’s outlook.

2. Valuation: What is BLT worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether BLT is currently mispriced by the market.

3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.