BHP Billiton is poised to unveil a bumper $4bn (£3.1bn) dividend as it attempts to head off the activist hedge fund Elliott Advisors, which has been running an aggressive campaign to overhaul its strategy and boost returns to shareholders.
The mining giant is on track to post a dividend of 84 US cents (65p) a share when it reports its full-year results late on Monday night in Australia. Its earnings before interest, tax, depreciation and amortisation are expected to be in the range of $20bn (£15.5bn), up from $12bn (£9.3bn) a year ago.
The dividend would be its largest since 2015, and marks the dual-listed miner’s recovery following a two-year slump in commodity prices. As its profits collapsed, BHP was forced to abandon its long-held policy of increasing dividends every year. It is now committed to paying out 50pc of its underlying earnings as dividends.
BHP, led by Andrew Mackenzie since 2013, is under pressure from Elliott to spin off its US petroleum arm, which includes costly onshore shale assets it bought prior to the collapse in oil prices. Elliott went public with its demands in April, attacking BHP’s “underperformance” compared to its peers and calling for an end to its dual listing in London and Sydney in order to return more cash to investors.
Last week the fund raised its holding in BHP’s London shares to 5pc, a threshold that allows it to call company meetings and nominate directors to the board. The deadline to propose board nominees falls on Aug 23, the day after BHP’s results are revealed.
BHP may shed more light on its plans once incoming chairman Ken MacKenzie takes up the role in September. Mr MacKenzie has already held more than 100 meetings with investors to listen to their concerns in the wake of Elliott’s high-profile campaign.
Peter O’Conner, an Australia-based analyst at broker Shaw & Partners, backed the new chairman to prune the portfolio and start delivering results.
He suggested that selling off assets may make it easier for BHP to consider ending its dual listing in favour of a primary listing in Australia – one of Elliott’s key demands.
“BHP is positioned to continue the upward journey from its recent tight corner – a once in a decade event – under the new chairman, who should be armed with reams of ‘post-listening tour’ ideas and suggestions, and calling on the lessons learnt from past restructuring episodes,” Mr O’Conner said.
BHP has been helped by stronger metals prices over the last year, as demand from China has recovered. The company is one of the world’s biggest miners of iron ore, used to make steel, but it has signalled its intention to grow its presence in offshore oil and copper.