Morning Report Wednesday 3 February 2016
Do people really believe BHP can maintain its dividend policy?
Last night oil fell over 5% and the Dow tumbled close to 300 points, there is no doubt which "tail is currently wagging the dog". BHP has been downgraded by the S&P ratings agency, this should hardly be a surprise when we consider the falls in both the oil and iron ore prices.
These two major commodities for BHP have both fallen ~70% since their highs of 2014 and considerably further since the lofty prices prior to the GFC.Investors should not remotely expect BHP to continue with its previous "progressive dividend policy" in this current economic environment - a disappointment for many considering that BHP shares are Australia's most inherited asset. Unfortunately we have to question the BHP's board even adopting this policy in such an historically cyclical business, it was inevitable that it would come unstuck at some stage.
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