Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:
International Trader: BHP Billiton by Martin Fluck, Arindam Nag and Matthew Curtin
Summary: A $10 billion buyback of shares, added to a planned 14% dividend hike, could be just the beginning for BHP Billiton (NYSE:BHP). The miner remains confident in the face of many challenges, including competitor acquisitions, consolidation among its consumers, China's improving position as an exporter of raw materials, and capital and incremental labor costs. Unlike its rivals, BHP likes to find its own projects, and also has a $17 billion investment pipeline consisting of two projects each in the U.S. and Australia. A cost hike is no threat, as the company can generate plenty of operating cash flow. BHP could consider any major acquisition that proves attractive, with net debt just below $8 billion, or 25% of its total capital, and with a comfortable credit rating that would enable further share buybacks. Bottom Line: "These are good days for BHP's investors. And its willingness to line its shareholders' pockets may pressure rivals Rio Tinto (RTP) and Anglo American (AAUK) to become more generous."
BBL 1-yr chart
Related links: BHP Billiton: "Where Opportunity Meets Preparation" • Is it Too Late to Buy Base Metal Miners Rio Tinto and BHP Billiton? • BHP Billiton: Another Earnings Report, Another Record