Recent Buy

buyI’m starting this month off a bit busier than usual, putting capital to work pretty much right away. Buying stocks is just extremely exciting for me, so the moment cash hits my hand I’m usually already thinking of which equities I might want to buy. Who needs a shopping mall when the greatest store in the world – the stock market – is available?

As was the case with my recent addition to my position in American Realty Capital Properties Inc. (ARCP), this purchase involved buying a stock after fairly substantial recent weakness. It also involved adding to an existing position. I first initiated a position in the company discussed below in April 2013 and it’s been sitting there ever since. I saw a chance 18 months later to average down on my position, and I took it.

I purchased 20 shares of BHP Billiton Plc (BBL) on 10/3/14 for $52.95 per share.

Overview

BHP Billiton Plc is the world’s largest diversified resources company. They’re engaged in the exploration, development, processing, and production of a number of minerals. They also have a substantial oil & gas business.

The company operates in five segments: Iron Ore (32% of fiscal year 2014 revenue); Petroleum and Potash (22%); Copper (21%); Coal (14%); and Aluminum, Manganese, and Nickel (13%).

Their production operations are located primarily in Australia, the Americas, and southern Africa. They have a workforce of approximately 123,800 employees and contractors at 130 locations in 21 countries.

This is a dual listed company structure. They have two parent companies – BHP Billiton Limited and BHP Billiton PLC – that operate as a single economic entity, run by a unified management team. The company is headquartered in Australia. This article is referencing the BBL shares that trade on the London Stock Exchange and are offered as ADR (American Depository Receipt) shares on the New York Stock Exchange for US investors. One can also purchase the BHP shares which trade on the Australian Securities Exchange, which are also offered as ADRs. Since the BBL shares trade in the UK, the dividends they pay are not taxed by a foreign government due to a tax treaty between the US and the UK.

Fundamentals

BHP Billiton experiences cyclical demand for their products, as commodities vary in demand and price based on a large number of outside factors. As such, some of their financial metrics can be a bit bumpy from year to year; however, the long-term trend is up. I believe it’s natural to expect short-term volatility in the pricing of many of the natural resources the miner explores for and processes, but long-term demand should drive increasing prices.

Their fiscal year ends June 30.

Revenue grew from $29.587 billion in FY 2005 to $68.730 billion in FY 2014. That’s a compound annual growth rate of 9.82% over that time frame, which is fairly solid. Revenue oscillated a bit during the Great Recession as well as more recently, but the long-term growth rate appears healthy.

Earnings per share increased from $2.08 to $5.18 during this time period, which is a CAGR of 10.67%. Overall, that’s a great result, though EPS does fluctuate quite a bit from  year to year. S&P Capital IQ predicts EPS will grow at a compound annual rate of 3% over the next three years, citing volume growth and productivity gains being offset by falling commodity prices (they predict supply growth to outpace demand growth).

What’s really wonderful here is that BBL has a rather impressive dividend growth record. They’re the only major miner that has been able to regularly and reliably increase dividends to shareholders over the last decade. You might not expect that from a company that’s exposed to such volatile commodity pricing, but I think that speaks well to both management’s desire to reward shareholders as well as their conservative and consistent operational history.

This stock pays semi-annual dividends, like most European stocks. It pays an interim dividend in March and a final dividend in September. The final dividend is typically the larger of the two.

BBL has increased dividends for the last 12 consecutive years. Over the past five years, they’ve increased the dividend at an annual rate of 10.6%.

The most recent dividend raise came in time for the final dividend paid in September, and was a 5.08% increase. This brought the yield up to 4.68% based on my purchase price. Meanwhile, the payout ratio remains low, at 47.9%, which should ensure future dividend raises even while earnings fluctuate.

One area BBL particularly shines in is their lack of leverage, as their balance sheet is better than any of their peers. The long-term debt/equity ratio ended at 0.38 at the end of FY 2014, while the interest coverage ratio is 38.4. Fairly impressive numbers, and allows BBL flexibility to take on large projects.

BBL’s profitability metrics are also substantially better than major peers. Net margin has averaged 23.43% over the last five years, while return on equity has averaged 27.22% over the same time frame. Competition, like Rio Tinto Plc (RIO), isn’t even close.

Capital expenditures have been falling heavily lately, and BBL expects this trend to continue as it allows internal businesses to compete heavily for resources and spending, which should increase profitability. This also bodes well for free cash flow generation and overall shareholder returns. Production for FY 2014 broke records across 12 operations and four different commodities, even while spending is dropping.

Qualitative Aspects

Commodities don’t offer the growth visibility that, say, food or shampoo does over the long haul. Therefore, I don’t plan to have a significant portion of my net worth exposed to BBL. However, like oil supermajors, there is definitely attractive aspects of investing here.

BHP Billiton has broad diversification across many commodities, which gives them some insulation from a massive change in any one commodity’s price. And they stretch the economic gamut: Iron ore is used in steel manufacturing, and emerging markets that are still building cities and expanding infrastructure need steel. Copper is used in building applications, as well as in consumer products, which would be used as these economies mature. Of course, agricultural needs change and grow as middle classes rise up and as the global population increases, which increases demand for potash. And then you have energy, which is a long-term growth story, which bodes well for their O&G exposure – they are the largest overseas investor in onshore US shale.

They own long-life, low-cost, expendable, upstream assets. These resources are finite, meaning when they are completely expended that’s it. You can’t go and just manufacture copper out of thin air –  you mine for it. While there is substantial recycling available for some of these natural resources, the supply slowly dwindles over time. As demand increases from not only developed economies that are still using these resources, but also from emerging economies that continue to grow and expand, the law of supply and demand takes over. That should bode well for long-term pricing.

The pricing power for BBL isn’t quite the same as a consumer products company, but there has been consolidation in the industry over the last 20 years which results in increasing pricing power and stability for those players still left. BBL is the largest such resources company in the world, and well-diversified by product, market, and geography.

Furthermore, their size and scale gives them an economic moat and competitive advantage. They already own substantial long-life assets around the world, and it’s not like any company can go out there and buy land and start mining it. It takes substantial resources to do this, and expertise in how to cost-effectively extract and process these resources. This naturally limits competition since the barriers to entry are quite high, which is probably why you only see a few companies really doing this. And BBL is the largest and most profitable of all of them.

One interesting aspect of BBL is that most of their sales are denominated in the US dollar. They also report their results in the USD and declare dividends in dollars. So this makes it a bit easier to track the investment and maintain some reliability/visibility in its dividend. It trades on the NYSE, reports in USD, and pays dividends in USD. And, as aforementioned, the dividend isn’t taxed by a foreign government. So this is really just like owning a domestic company, but it gives you substantial foreign exposure. The only aspect that might ruffle some feathers is the semi-annual dividend, though that doesn’t really bother me.

A potential catalyst for near-term shareholder returns is the proposed demerger of a selection of high-quality aluminum, coal, manganese nickel, and silver assets. This would allow BBL to focus on their large, long-life, ore, coal, copper, petroleum, and potash basins. They believe this renewed focus on these assets would allow them to increase productivity and reduce costs on the larger businesses, generating even greater returns on investment and free cash flow. The assets that would be jettisoned constitute a very small portion of BBL’s profit.

The demerger, if finalized, would result in two independent companies, and BHP Billiton shareholders would receive shares in the new business. A potential issue is that these shares may trade solely on foreign exchanges.

Risks

Of course, one should consider the risks of investing in this company (as with any company).

There is exposure to highly cyclical commodity markets, which means BBL’s results can swing from year to year. Commodity price swings can have a material impact on BBL’s profitability. In addition, it’s quite capital-intensive to extract resources and get them ready for market. And while competition is somewhat limited, BBL still faces a strong competitive marketplace across all of their commodities, especially petroleum. I would also consider geopolitical risk, although BBL primarily operates in stable economies with governments that are highly unlikely to start nationalizing resources.

Valuation

Shares in BBL trade hands for a P/E ratio of 10.22, which is far below the broader market. Furthermore, it’s also well below BBL’s own five-year average of 14. Mining stocks, including BBL, have been weak lately due to concerns over growth in China. And BBL specifically has seen its stock fall lately after the proposed demerger was announced, as there has been some concern over the lack of a new buyback program – the stock is down over 22% since the demerger was announced on August 19.

I valued shares using a dividend discount model analysis with a 10% discount rate and a 5.5% long-term growth rate. I used a much lower growth rate than what BBL’s dividend and EPS has grown at over the last decade, which compensates for potential lower growth moving forward and the cyclical nature of commodities. So I’m attempting to build in a margin of safety here by using a rather conservative growth trajectory. The DDM analysis gives me a fair value on shares of $58.14, which implies a ~10% discount based on what I paid. So a margin of safety definitely seems present, as I valued shares rather conservatively, which still resulted in a price over and above where shares are trading at right now. There’s potential that BBL shares are significantly undervalued here.

Conclusion

BHP Billiton is the largest diversified natural resource company in the world. They have broad exposure to a number of resources that the world needs to build, thrive, and grow. These resources are finite by their very nature, which should mean they become more valuable as time passes and supply slowly dwindles. And the competitive advantages are already built-in based on the immense cost and expertise necessary to take on leases and mine for resources in a cost-effective manner.

A proposed demerger could provide a catalyst for further shareholder return, as it will not only allow BBL to focus all of their capital and attention on the assets that provide the vast bulk of their profits, but may also allow the new, independent company to potentially provide additional upside all by itself.

This purchase adds $49.60 to my annual dividend income, based on the semi-annual dividend of $1.24.

I’m going to include current analyst valuation opinions below, as I use these to concentrate my reasonable valuation estimate:

Morningstar rates BBL as a 4/5 star value, with a fair value estimate of $76.00.

S&P Capital IQ rates BBL as a 4/5 star “buy” with a 12-month target price of $74.00.

I’ll update my Freedom Fund in early November to reflect this recent purchase.

Full Disclosure: Long ARCP and BBL.

What do you think of BBL here? Do you think this buy makes sense? 

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

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121 Comments

  1. Hi Jason

    I have recently bought BHP Billiton too, and also managed to average down with the recent market falls. I am looking forward to them continuing to increase their dividend payout as they have done for the last 12 years to add to my yearly income.

    Like you I think their diversified commodity base is a great asset as they are not reliant on one specific commodity price, I also read a recent Bloomberg article that they and Rio Tinto are cutting their production costs and increasing their output to win market share from higher cost producers.

    Long may their performance continue.

    Best Wishes
    FI UK

  2. Great buy here Jason. I’ve been watching BBL for a while and am planning on picking up some this month. Once I saw their price dip below $60, I got hopeful that it would continue to drift down and am quite happy it has continued to do so. You mention the size of their moat, and this is really where they are second-to-none as they truly have the scale and resources to mine at a cost-effective rate where others cannot.

  3. Great buy, I think right now it’s a good opportunity to initiate new or add to existing positions. If adding to existing positions, it’s a good opportunity to average down.

  4. Seems like a good buy. I’m not too big on the semi-annual dividend payers, but I would like to get a good global mining company that specializes in various commodities in my portfolio. I’m going to watch this one.

  5. DM,
    Congrats with the purchase! You dont waste no time huh making purchases on Oct 1 and 3! Time is money! I am currently researching some stocks (MMM) right now during my free time and I kinda wondering what others are up to then clicked your site, viola another recent buy! I like how the eps and div growth are on the same pace. How do you calculate the last five year average PE? Thanks for sharing my friend!
    FFF

  6. A lot of oil/energy stocks have been feeling the pinch with low oil prices. This should make for a great long term buy.

  7. FI UK,

    Glad to have you on the same page!

    BBL was actually performing fairly well for me on a total return basis up until the demerger announcement. That led to opportunity, which led to me adding here. 🙂

    Yeah, the cost-cutting and productivity gains should fuel excellent returns over the next decade and beyond. My valuation was quite conservative, but I think shares are significantly undervalued here. I don’t want to go too crazy with a natural resource company, but I’m happy to increase my position.

    The demerger is interesting. We’ll see where shares are traded. Initially, they were going to list on just the ASE. But I read that they’re thinking of listing on the LSE as well, like the current BBL/BHP structure. So that would work out pretty well for you.

    Cheers!

  8. W2R,

    I got lucky and caught it at basically the 52-week low. I’m extremely horrible at timing things like that, so we’ll see where shares go from here. I was just happy to average down 18 months later, as it had been pretty strong over the last year.

    The competitive advantages are definitely there. High barrier to entry, and the expertise/cost necessary to mine these resources are in the hands of just a few companies. And BBL stands above all of them. Happy to be a shareholder here.

    I think shares are cheap here after the substantial recent pullback. Would be happy to have you as a fellow shareholder!

    Best wishes.

  9. Tawcan,

    I don’t mind averaging up if the fundamentals are commensurately improving, but BBL’s numbers look largely similar to where I invested before. Thus, I’m more than pleased to average down. 🙂

    Take care!

  10. Joey Batz,

    I can see how the semi-annual dividend schedule might annoy some. But I have 50 dividend payers now, so I’m receiving dividends fairly often now. Plus, I’ve got a couple of monthly payers in there to balance out the semi-annual schedules.

    Take a look and see what you think of BBL. The valuation seems compelling to me, but I also wouldn’t want it to be a major portion of my net worth.

    Best regards!

  11. DM,

    Great snag at the lows. I picked up some shares of BBL today as well. I also acquired some ARCP and GE. Energy continues to be attractive right now and I think long term investors need to take advantage of some insane yields on quality companies.

    MDP

  12. FFF,

    Haha. Time is money, indeed! 🙂

    I usually don’t deploy capital so early in the month and in such a rapid fire fashion, but deals are deals. And the cash flow situation seems okay right now, so I felt comfortable here.

    The five-year average P/E ratio can be accessed via Morningstar. You can see this under their Valuation tab. This is what it looks like for BBL:

    http://financials.morningstar.com/valuation/price-ratio.html?t=BBL&region=usa&culture=en-US

    I hope that helps. 🙂

    Cheers!

  13. John,

    Big oil has definitely been weak lately. I’ve got plenty of exposure there, but if they remain priced right when the capital is replenished I’m not totally averse to buying more. This was kind of an indirect play there as BBL has substantial O&G assets (they’re one of the 10 largest independent upstream O&G companies).

    Happy shopping out there! 🙂

    Best wishes.

  14. MDP,

    Sounds like we couldn’t be more on the same page! That’s where my capital has been going lately as well. 🙂

    The broader market might be near all-time highs, but I think value is still available. And those names are some of the better values right now, though not without unique risks.

    Best wishes.

  15. Congratulations on another buy! You have been busy at the start of the month 🙂 and yet more dividends to add to the pile – fantastic stuff! They seem like a solid position to hold for now.

  16. Mister Market is in a bad mood, giving discounts today!
    BHP is looking very interesting, I think about purchasing them also.

  17. Cool buy! Curious…. I follow you a lot and noticed from time to time you have commented on diversifying not only your portfolio, but also your brokerage accounts as a whole so that all of your wealth isn’t tied up in Scottrade.

    I have a tiny dividend portfolio with only several thousand dollars in it. I made only a few hundred dollars extra every month to invest, which is paltry but I invest anyway and simply hope I will have more to invest next month and the month thereafter.. With that said, I’ve looked at wealth management options and one that sticks out is Wealthfront. I see many people experiencing returns from 6-8% and their management fees are extremely low.

    Those numbers (6-8%) appear to me to be very comfortable, if not really high, and require little to no work. I wonder, if you wonder, about putting some small amount of capital into there A) for diversification, and B) just to see how it works!

    With your current 170k, if you made 6% this year you’d pull in over 10k, blistering your goals and with much less headache, for a mere $25 fee (Much less than the cost of brokerage fees unless you are flooded with free trades).. Just food for thought because we all need to take advantage of what is available to us..

    Good luck dude. Rooting for you and all the other guys trying to trade a Washington for a Benjamin.

  18. DM,

    great pick! I own and like BHP for a long time now and never regretted it. They are the benchmark when it comes to resources.
    The current decline in price is a great buying opportunity. Why wait?

    Well done.

  19. I picked up some BBL as well…nice buy. Any thoughts on Cummins (CMI)? They have come down a bit and look attractive under 130 IMO….

  20. Dm,

    Great buy! Your posts are becoming more in depth. Having that extra time is really paying off in both your writing and in your net worth! : )

    Today I was fortunate enough to buy more shares of ARCP and average down my position. It is a truly wonderful feeling to be able to put excess capital to work.

    Happy investing!

    DivStrong

  21. Good buy here to average down. The market got hammered today so I’m salivating to buy. I’ve been watching closely to pull the trigger on a select few I’ve been watching or just add to my holdings. In any case, I think it’s a good buy and will serve you well in the freedom fund!

  22. The ebbs and flows of the dividend blogging community. It’s always interesting to me to see how others are investing their money on a weekly or monthly basis. I remember earlier in the year when TGT was the buzzword among DGI bloggers. In recent weeks MAT has been hitting the spotlight with their enhanced yield due to falling share price. Your recent buy makes perfect sense at this juncture. Commodities in general are all getting rocked. Oil, wheat, gold, silver, copper, etc. have seen major price declines in recent weeks. Jumping into a commodity based stock might be a very smart call at this time. I know many are looking at energy companies as well. Thanks for sharing your recent purchase. Good insight!

  23. You are certainly starting out October with a bang! Nice catch at the low as well. 🙂

    I came across BBL a while back (initially mistook it for Blackberry, haha) but was not thrilled with the semiannual dividend. You do make a compelling argument, though. I think I’ll add it to my watchlist for now.

  24. You’ve been on a bit of a buying spree here DM. I always enjoy reading about others purchases, its sometimes a reminder of what stocks are on sale that I may have missed.

  25. BBL sounds like a great company. I wish I had known about it years ago, it would have complemented my NUE and APD positions nicely. Maybe what turned my away from BBL was its relatively short dividend increase streak, which back in 2010 would have been shorter.

    I think you bought at a great time!

  26. Nicola,

    Things have been crazy to start the month off. I wish I had enough capital to treat every week like this! Shopping sprees all the time. 🙂

    Thanks for stopping by. I hope your arm is feeling better!

    Cheers.

  27. Wish,

    “I see many people experiencing returns from 6-8% and their management fees are extremely low.”

    Hmm, 6-8% returns aren’t very impressive. Unless you’re confusing return and yield. The long-term average return of the stock market is somewhere around 9%, depending on the source you use. I don’t need to pay someone else to achieve that, as I’m quite capable of doing so (and have done so) on my own.

    Now, yield is a different story. However, you’ll have to be careful, as chasing yield can lead to sub-par returns. High-yielding stocks oftentimes carry high risk, so be mindful of that. If I wanted my portfolio to yield 7% or so I could, but I’d rather expose myself to a broad variety of high-quality stocks with higher growth rates, so that’s why you see companies like Johnson & Johnson (JNJ) and The Coca-Cola Company (KO) (yields near 3%) alongside stocks like AT&T Inc. (T) and American Realty Capital Properties Inc. (ARCP) (both yielding higher than 5%).

    I hope that insight helps!

    Best wishes.

  28. Stef,

    I agree. This recent decline is nothing more than an opportunity, in my view. FCF is up over the last couple of years, margins are great, the dividends continue to increase, and renewed focus on the core assets could work out very well.

    Glad to be a fellow shareholder! 🙂

    Cheers.

  29. Tom,

    I like Cummins quite a bit. I really regret not buying CMI when it was in the $80s. I don’t miss many, but BDX, CMI, LMT, and V are the ones I really remember missing out on over the last four years. It looks solid here, and the recent dividend raises have been incredible. I don’t think you’ll be unhappy buying here if you plan on holding for the long haul. The valuation is roughly in line with its historical norms, and earnings are probably going to remain strong.

    Best regards!

  30. DivStrong,

    Hey, I really appreciate you noticing the added depth. I’ve had more time to hone my craft and it’s been great to spent more time on the details. I was always rushed before with the full-time job crowding out my passion. 🙂

    Glad to have you on board with ARCP. Mr. Market hates that stock, but I think the long-term potential is enormous. Comparing it to Realty Income’s portfolio and seeing that it outshines it in many aspects is really amazing. Let’s hope they manage that potential correctly.

    Best wishes.

  31. Agent,

    You’ve been really great at putting capital to work over there. It’s a long, slow snowball roll down the hill, but you’re doing fantastic. Keep it up! 🙂

    Cheers.

  32. DivHut,

    I agree. It’s always fun and interesting to see where other investors are going with their hard-earned capital. Of course, we all work very hard for our money, so we take these decisions very seriously. But it is reassuring to see others with the same thought process at play, just as long as there isn’t a herd mentality going on there. But I don’t think that’s really the case, as value is value. You’ll see people rush to a particular stock or two because that’s where the value is at. Reminds me of NSC when it dropped in the $50s, AFL when it dropped below $40, and TGT when it dropped below $60. Money follows the value, typically speaking 🙂

    Thanks for stopping by.

    Cheers!

  33. Seraph,

    I might have used up all the ammo in my pea shooter for this month, unfortunately. I tend to exercise pretty good patience, but the market has provided ample opportunity over the last week or so. I’m obviously pleased! 🙂

    Take a look at BBL and see what you think. I understand your concerns over the semi-annual dividend, though. I consider it a very minor issue, and I’m in a great spot in that I already have enough quarterly/monthly payers to offset that.

    Best regards.

  34. Captain,

    I don’t have the firepower I used to, but I’m still keeping up with all these youngins. Hahaha! 🙂

    This was probably the last purchase of the month, but if the market keeps moving south I might have to really get crazy this month. We’ll see.

    Thanks for stopping by!

    Best regards.

  35. Spoonman,

    I hear you on the short dividend increase streak. It’s shorter than some other stocks out there due to the 2001 merger between BHP and Billiton. But they’ve been steady and consistent with the dividend increases ever since. And they’re the only major miner out there with any measurable success in regards to regular payout increases.

    But the great thing is we don’t need to hit every opportunity out there to succeed with this strategy. We can miss out on plenty of opportunities (every stock competes with every other available stock), but the opportunity cost isn’t that great as long as our income is paying our bills and its rising faster than inflation. Winning is winning. Doesn’t matter if you could have run the score up a little more. 🙂

    Best wishes!

  36. You’re not far away from the 5-YEAR low. Not a bad entry point for a company that trends upwards in the long term.

  37. Hey Jason, I just stumbled across your story that was featured on the Today show last year. Very interesting. Well done on the savings! I’m sure you’ll achieve your goal eventually. I think everyone wants what you are striving towards – to be financially free and have the ability to quit their day job without worrying about money. I enjoy reading your updates as you progress along your journey. All the best

  38. DM,

    Nice buy. As a few commentators have stated there are a lot of good deals right now with the recent dip in overall prices. BBL provides not only good value, but also internal diversity. (I don’t know how I feel about semi-annual dividends though.)

    A demerger is a very interesting process. Recently SAIC split (not a demerger) into SAIC and Leidos, a move that some founding members of SAIC state is a big mistake. I think for their reputation and abilities it might be, but the short/medium term profits will probably beg to differ.

    BBL is much different from that one. On the surface all those metals and materials are mined by similar processes, but it is their intrinsic value that separates them. Aluminum, nickel, manganese, etc. are a class of metals that are extremely useful in technology, building and so many other uses. They are very tangible.

    Outside of ore, the other side of BBL would hold copper, coal (shared by both, seemingly in unequal parts), oil, and potash provide energy. Everyone knows what energy is, but many have a hard time defining it; whether it be gas in your car, electricity (copper wiring), or heating oil these materials provide such a different service. It is one that is almost expected in 1st world countries, and taken for granted. BBL is smart in their divide, because their markets are vastly different.

    Do you also think their is some geographic issues at play?

    – Gremlin

  39. Justin,

    I’m not good at timing, which is why I don’t bother. However, it looks like I caught this one at a good price. It was just a few pennies away from the 52-week low. I think the long-term story is compelling, as is the value and yield. I’m optimistic. 🙂

    Thanks for dropping by!

    Best wishes.

  40. Dan,

    I fondly remember that day. It was a lot of fun. What’s amazing is that they spend like four or five hours with me and condensed that down into like two or three minutes. I must have blathered on for hours about the how/what/why of what I’m doing. Must be a hell of an editing job. 🙂

    Appreciate the support very much. I’m truly blessed to be able to march toward this wonderful goal and inspire others in the process.

    Best regards!

  41. Gremlin,

    What’s left of BBL will be the far more interesting company, if the demerger goes through. The other assets constitute a very small portion of profits. If they’re traded solely on a foreign exchange I might just offload that stock. We’ll see how everything shakes out.

    I’m not sure what you mean by geographic issues. It appears to me the main reasons the stock has been so weak has been supply/demand concerns and then the demerger news, which was not received well. Seems like an opportunity to me, as the company remains fundamentally sound. I can’t predict commodity supply and prices, but I do know that demand for iron ore, copper, potash, and the like should remain strong 20 years from now.

    Cheers!

  42. Hi,

    I worry about a Cliffs natural Resources style implosion of stocks in this area. Your analysis looks solid, but personally I am going to pass and see if things get cheaper …

    Good Luck

  43. Jason,

    Way to continue your amazing progress and congrats on a second fine purchase in a few days. Mighty fine dividend yield and growth rate here. I’m loving these days when the market is down. It feels great to have so many more choices to deploy new money, especially adding to these positions you haven’t touched for ages. I might have to buy something a few days early if the market keeps teasing me. Wishing you the best!

    ~Ryan

  44. DM, I picked up a little BBL today as well so obviously like the pick! Been long BBL for about 2 1/2 years and today’s buy at 4.60% initial yield is the highest yield I have seen during that time frame.

    cheers, AA

  45. very good point. I am actually worried about this demerger thing could bring out nasty surprises. I would rather prefer the company to be the way it is, which is more diversified and has been good for so many years.

    Why change something that has been working ? I am just not sure about it. Everyone praising & commenting here, good buy, good buy. No one talked about demerger and possible company outlook change. would like hear about that if anyone has any idea.

  46. Haha, love it when the market is choppy. Good time for sharks like us to feed!

    Looking generally to increase exposure to energy and financials (healthcare to a lesser extent)… value trumps industries, but that’s where I think the precious stones will be found during Q4.

    Considering overall value, recent rise of the USD, normal to slightly weak overall oil demand, seems like a decent time to get into energy. Still need to do a bit more research… and then find out where to get the money. 🙂

  47. HI DM,

    One small technical question: when I tried making a search for BBL using My brokerage account I got the following:
    BHP Billiton SP ADR (Isin Code US0554E2090) traded on the NYSE.

    What does the SP stand for. Is it the same company as BHP Billiton ADR?

    I am also thinking of averaging down as well on GE, AFL and ARCP and DE (after the nice drop)

    Cheers

  48. In theory it shouldn’t matter… in practice it does matter a little bit. So long as the valuation metrics, profitability, growth, etc, make sense… there shouldn’t really be much benefit/cost to paying monthly, quarterly, or semiannually.

    It does take some time to adjust to that though. The real risk is if you overvalue a more frequent payment schedule, as you’ll be missing out on some things.

  49. Hi Jason

    I hadn’t picked up about the possibility of listing the demerged element on LSE, so yeah would be good for us over here. I guess they would also create ADR’s as well so would be good for you too.

    Thanks

  50. Hey!
    I too am a bit confused about the future of BBL, at least over the next couple years. I have a significant allocation already and probably should have sold it when I started to get these thoughts. Because my personal history is usually correct.
    Since there are too many vague unknowns at this point, including the rapidly deteriorating conditions around the world, I have hesitated from seeing this share price decline as a bargain.

    Rather, it scares the crap out of me and my beautiful shares of ownership in BBL.

    So, my personal rule is if I have at least one major concern about the future(at least the next five years) of a company’s direction, I dont invest.
    Now, this is only my OWN Analysis, so everyone take it easy… As I said before, I own a block of this company so I hope that I am wrong!!

    As a side note, I have chosen to begin a position in XOM at this time. It should give me much higher chance of upside returns iver the next five to ten years. The posiotion is forming under a methodically executed plan with no emotional component whatsoever.

    These are my thoughts right now.(only stated to give healthy two-sided debate)

    Peace
    Lou

  51. Roger H,

    I disagree that Cliffs and BHP Billiton is anywhere near a close comparison. Cliffs is largely an ire ore company that is less than 1% the size of BHP Billiton. I specifically mentioned BBL’s size and diversification as a competitive advantage, which Cliffs lacks.

    Cheers!

  52. Ryan,

    I’m with you. Cheaper stocks equals opportunity. Times like these are when you find out who’s serious and who’s not. I’ve been getting emails lately discussing panic, and how now’s a bad time to invest (just two weeks ago when stocks were more expensive was a better time). You can clearly see where that’s going…

    Let’s hope this continues. I’m looking forward to it! 🙂

    Best regards.

  53. AA,

    Sounds like we’re completely on the same page, though I’m sure your BBL position dwarfs mine! 🙂

    Keep up the conviction and consistency. You’re killing it over there.

    Best wishes.

  54. Do you happen to know how much is the ADR fee for BBL? I could’t find the information anywhere. It is supposed to be in the range $0.01-$0.03/share.

  55. Irwin,

    I don’t anticipate any nasty surprises. The Aluminum, Manganese, and Nickel segment accounted for about 1% of last fiscal year’s EBIT. It’s a very small portion of the business, and not very profitable. It reminds me of GE’s recent appliance sale, where you have a division that sounds good on paper and diversifies the business, but brings in very little profit relative to revenue due to low margin. Some new focus might change this.

    BBL might not be for everyone. I’m not here to talk anyone into buying the stock. I simply share my transactions and research, and in that I hope to educate/inspire others. I would recommend reading through the last few annual reports to formulate your own opinion.

    Take care.

  56. Ravi,

    “and then find out where to get the money.” That’s always the tough part, right? 🙂

    I agree there’s some value in energy. BP is probably one of the best values out there right now, but with potentially the highest risk as well, between its Russian exposure and ongoing litigation. I’ve got pretty heavy exposure to energy right now, so I continue to tread carefully there. But if there’s an obvious value, I might jump on it.

    Cheers!

  57. Dino,

    I’m not sure what the SP stands for. The ticker is BBL, so it looks like you’re looking at the right stock. You may want to contact your brokerage for further clarification on that.

    Those are some nice stocks on your list there. I wouldn’t mind buying any of them right now, as I’ve recently bought three out of four (all but AFL) very recently. 🙂

    Best wishes!

  58. שגב,

    Thanks! Appreciate the support. 🙂

    I hope you take a look and see what you think. It offers some exposure to natural resources at a solid value and yield, so we’ll see how it goes!

    Take care.

  59. Lou,

    If I wasn’t comfortable with BBL’s prospects over the next 10 or 20 years, I wouldn’t have invested here. Thus, if you’re not optimistic about their future, and you are coming from an unemotional perspective, then maybe it’s not a good investment for you.

    A stock drop is an opportunity, assuming the fundamentals are intact and the future prospects are still bright. Contrarily, a stock drop when the company is turning to crap is not an opportunity, and probably a good time to bail. Deciphering one from the other is difficult, but more often than not I’m willing to bet that high-quality companies that provide ubiquitous products and/or services that people/businesses/governments all around the world require are more often than not going to fall into the former category. But you’ll have to decipher each situation on its own merits for yourself.

    Cheers!

  60. Congrats on a second purchase! Heh, great minds think alike, because I’m really interested in BBL myself! I’m actually working on an in-depth analysis as we speak. I personally like how BBL is like a ‘mutual fund’ stock in and of itself, based on its size and how many distinct assets it owns. This could probably be your only basic materials stock, and it’d still be solid diversification. Hope to join you as a shareholder soon!

  61. Paapaa,

    That’s a good question. I noticed my BBL dividends don’t have any fees deducted. I’ll have to look into this a bit more, as most ADRs have a $0.01-$0.02 fee, per share. Usually it comes right out of the dividend.

    Cheers!

  62. DD,

    Oh, looking forward to your analysis. It’ll be interesting to see what kind of conclusion you come to. I agree with you in that it’s a heavily diversified company with the mineral, agriculture, and energy angles.

    Would love to eventually have you as a fellow shareholder! 🙂

    Cheers.

  63. Hi Jason,
    Appreciate your comments. I only posted in response to your question at the bottom of your post. I find that a good back and forth between readers is very beneficial. Its hard to find on this site very often though. You give us good ideas and analysis and then pose a final question.
    So I like to join in with MY thoughts to gain other peoples’ insights. I hope more people chime i past the points of “oh very nice buy”, with some solid thoughts on the posts with facts as you post.

    Nonetheless, thanks again because I am having a real hard time with this BbL company recently.

  64. I bought shares of BBL in June 2013 at $58.39, so that provides a great opportunity to average down. My latest fair value estimate is $75 (coincidentally between your quoted Morningstar and S&P Capital IQ values).

    Good buy!

  65. Say the demerger goes through and you know own shares of the new company on a foreign exchange. You mentioned in a previous comment that you might just sell the shares of the new company. How does that actually work? Would you get hit with extra commissions and fees since the shares are on a foreign exchange?

  66. FerdiS,

    Glad to have you on board as a fellow shareholder! 🙂

    I was purposely conservative with my fair value estimate to compensate for the cyclical nature of their results and underlying commodity prices. As well, there has been substantial weakness in iron ore prices lately, which may speak to oversupply concerns. It’s interesting to note when I bought BBL last year Morningstar had a FV on shares at $100, and they’ve come down quite a bit from there. But I think a margin of safety definitely exists here, no matter how you slice it. And that’s what we’re really after, since the fair value can only be a reasonable estimate.

    Thanks for dropping by!

    Best wishes.

  67. DM,

    Nice job diversifying. A REIT that looks deeply undervalued by the market and now a commodity. I haven’t digged too deep into BBL, but I know even with receiving several dividends often I’d like a more frequent schedule. Then again I still have Disney with their annual payout and a few SQM shares with the semi annual schedule.

  68. Jake,

    Good question!

    I’ve never actually gone through the process, but my brokerage, Scottrade, states that the commission fees ($7) of buying/selling are generally the same. That may vary from brokerage to brokerage, however.

    My decision to keep or sell the new shares would really revolve around the quality of the business, which might not be evident right away. But based on the low profitability of the segment in question and BBL’s desire to jettison the assets, that my speak for itself.

    I would personally prefer to keep things simple and own stocks on US exchanges only, but I would make an exception if the opportunity warranted itself. Not sure if that’s going to be the case here. We’ll see. A lot can happen between now and then. Maybe ADR shares will be available to US-based investors.

    Cheers!

  69. SWAN,

    I hear you. I can see how the semi-annual payout might not be attractive to some investors. It doesn’t personally bother me at all, but that’s probably because I already have a substantial passive income stream built now. Most of the portfolio pays quarterly, and a couple of monthly payers balance out the semi-annual payers like BBL.

    Thanks for sharing your thoughts! 🙂

    Best wishes.

  70. Hi Jason!

    I’m an avid reader of your blog; it’s been a great resource for me as I dip my feet into dividend investing. When you first got started, were you reinvesting your dividends back into the stocks you purchased or cash into a core account and using that to buy different stocks? My annual dividend income is only $389 thus far. Was wondering if one was better than the other in terms of compounding faster. I guess I’m really eager to see results. Let me know your thoughts. I would really appreciate it!

    Best,
    Melissa

  71. Melissa,

    Thanks for your readership. I truly appreciate it! I hope you continue to stop by and find inspiration here in what I’m doing, and what other members of the community are doing. 🙂

    You have a great question there. I do it now as I’ve always done: I let the dividends collect, combine that income with fresh capital from work, and then use the combined sources of cash to make my stock purchases. I discussed that a bit here:

    https://www.dividendmantra.com/2014/03/selective-dividend-reinvestment-vs-drip/

    My dividend income finished at $269.33 for the year of 2010. You’re off to a great start! 🙂

    Keep it up.

    Best regards.

  72. kingkang,

    I purchased the BBL shares, which are the London-based shares. BHP shares trade on the ASE, and are also offered as ADRs. I referenced this in the article.

    Cheers!

  73. DGJ,

    Thanks!

    I think the valuation is compelling on its own merit, but the fact that the price is near 5-year lows while the fundamentals remain sound is certainly quite nice. We’ll see how it goes. 🙂

    Best regards.

  74. DM,

    No one is saying you are talking anyone into buying this stock.

    But as always at the end of your post you say (which I think you should change if you dont want discussion or opinions from readers)…. “What do you think of BBL here? Do you think this buy makes sense? ”

    so we are giving our opinion and trying to see both sides of the coin.

  75. BTW, I have BBL as well but reluctant to add more since it started moving down after their demerger announcement. Some has to with the market as well but that accelerated its downward move.

    In any case all discussions welcome.

  76. Irwin,

    I understand that. You made a comment about the purchase, and I commented back…like I do with everyone else. That’s “both sides of the coin”. I respond to comments that are both positive and negative with my thoughts.

    You asked if anyone had any ideas about the demerger, which I responded with. Of course, you could view the annual reports and see that the assets being spun off have almost no profitability.

    Cheers!

  77. In Sweden most companies pay annual dividends. I would like them to pay more often. That would also encourage longer term investing in general I think.

  78. Sensim,

    I agree. I’d be willing to bet that quarterly dividends would get more people interested in investing, at least in stocks that pay dividends. Although annual dividend payouts can be overcome, it’s much easier to see the tangible results when the payouts are streaming in more regularly. Plus, it allows you to compound your dividends even faster.

    Thanks for sharing your thoughts!

    Best wishes.

  79. Interesting purchase. I am already way too exposed to Energy, so I would probably pass on BBL. I am not sure if their dividend record is merely a byproduct of being lucky that the prices of their commodity product went up in the early 2000s or because they have some type of an inherent advantage due to scale etc. Competitor RTP does not have the type of dividend record, which means that BBL is at least more shareholder friendly ( which is good).

    Anyway, when stock prices fall, it is much easier to simply buy shares. I am really hopefull that we are finally going to see a big correction of say 20%, that scares all the weak hands off. I have some money coming in late Nov-early Dec, so I would be happy for that to happen.

    I am also happy that you are able to make enough money in self employment to not only cover your expenses but also to put money to work and continue building your portfolio out.

    I wish you best of luck!

  80. It’s great to be busy! I have been a little busier than usual myself this month. A few more buying opporutunities arose and i took them!

    I haven’t done much research on BBL, but I have seen it pop up from time to time around the interwebs. I don’t have much exposure to commodities besides oil. The mining sector always worries me, it seems like slow downs really affect more viciously than oil prices. Time to do a little more research!

    Take care!

  81. Hi Jason. I also bought some BBL yesterday! I used weekly automatic investment from Sharebuilder and because I cannot exactly time the transaction with this program, I got a higher price than you did: should not matter much in the long run! It was a new position for me. Now I can feel good anytime I get to average down on this in the future 😉

    By any chance, do you know of any solar energy company paying dividends in the solar energy sector? I am interested to diversify and get some exposure to that sector. Seems like solar panels are getting more and more affordable and I am convinced solar energy will be more and more present in the future…

    Cheers!

  82. ILG,

    Just checked out your recent post. You’ve definitely been busy! Great job.

    Nothing like a good stock sale to get us excited, right?

    Thanks for dropping by. Keep up the great work.

    Best wishes!

  83. Fab,

    Glad to have you on the same page here. And getting in on “the ground floor” will definitely make us feel better averaging down, if we get such a chance. 🙂

    I honestly don’t know of any solar energy companies paying a dividend. At least, not as in a company that just does solar. You have a lot of major utilities out there (like Southern) with pretty large solar projects. But I agree with you that solar panels – direct installation on homes where people can largely live off the grid – should be a huge industry in the future. Even some of the major utilities have been discussing the possible death of their business model due to this threat, which is one reason I have very little exposure to traditional utilities. I wish I knew of a play here that made sense, but I don’t. I looked at FSLR a while ago. Seemed all over the map with their numbers. Hard to really get a grasp on things, and no dividend meant I was out.

    If you or anyone else has any ideas there I’d be interested.

    Best regards!

  84. mostly useless trivia but the SP is short for sponsored ADR – meaning roughly that the company set up the shares with the custodian bank.

    Good summary/evaluation of BBL I agree that there’s good value here and recently added some myself at 54

  85. Mantra,

    Just simply loving the capital spree you are on! Digging this big time, I have been wanting to buy a few companies this week and am EXTREMELY mad at myself for not pulling the trigger this morning. It’s funny, I actually was on the phone with Bert and said Hey I dont want to talk about the market today, I didn’t pull the trigger when I wanted. BHP is huge, great yield, great growth, great valuation, nuff said. Nice work again DM for adding to your dividend income and “pulling” the trigger. It’ll be bearing fruit in no-time. I am hopeful October is a big month for me after a quiet September. What can we do to cause a tumble to a few stocks… haha if only. Talk soon.

    -Lanny

  86. pacer45,

    Thanks for sharing that. I honestly had no idea that’s what SP stood for. I’ve heard of the term “sponsored ADR”, in that they’re sponsored by the company. I guess I haven’t actually run into any unsponsored ADRs, so I just take it for granted.

    Glad you enjoyed the post. And also glad to have you on board here, adding to your position. It’s wonderful to have like-minded long-term shareholders holding the fort down. 🙂

    Cheers.

  87. Lanny,

    Thanks for stopping by! And congrats on another great month of savings over there. Consistently saving over 50% of your net income is a surefire way to build wealth.

    I’m lucky in that I’m still able to buy stocks on a regular basis, even after quitting my full-time automotive job to pursue writing. When I first made the decision, I wasn’t real sure how it would all work out. I felt I could for sure break even, but I definitely wanted to keep saving and buying stocks. Otherwise, I couldn’t continue to shoot for financial independence and that just wouldn’t work. But the fact that my savings is creeping back up to where it was before and I’m making multiple stock buys in a month is just wonderful. I’m ridiculously happy right now. 🙂

    Keep up the great work.

    Best wishes!

  88. Hey Jason. I started following your blog almost two years ago and it convinced me to test the waters with dividend investing (after a couple let downs with ESPP and hot stock strategies). After reviewing the info you gave in this recent post, I decided to pull the trigger and BBL finally rounds my portfolio out to 20 companies, which was my goal for 2014. It’s been inspiring to see how quickly this little snow ball grows! Thank you as always for sharing your analyses and learnings with all the rest of us 🙂

  89. Camille,

    We have similar blog titles. And fonts. Way cool. 🙂

    Glad you found some inspiration to try this strategy out. And I’m very happy to read that it’s working out well for you thus far! BBL may be a bit more volatile than most stocks I invest in, as its beta of 1.69 will attest. But volatility is opportunity for the long-term investor.

    I hope your snowball continues to roll downhill at an even faster rate. Keep it up!!

    Cheers.

  90. Another company is planing to introducing plain packaging. How does this affect your view of PMI?

  91. Jason,
    This is a great buying opportunity for investors at the current price. Lately I have been making small weekly purchases with free trades and it seems to work well because I can diversify a lot quicker. I still have an outlook of 40 years to add to my portfolio so I am sure BBL will be on their at some point. Good luck on your Iinvestment!

  92. Solid buy! I need exposure to more heavy industries at some point too. BBL may be considered, but I think for now big energy is at the top of my list (short term). Too bad I just got into F at $15 recently. Need to find some more money! Got any tips on growing a money tree? 🙂

    Random question: Do you have a online brokerage you prefer (or any you would suggest avoiding)? I read a few articles which suggest Schwab, Vanguard, TD, Scottrade, Fidelity (and a handful of others) in the top 10. They suggest avoiding Merril and Wells Fargo. http://www.thinkadvisor.com/2012/06/14/10-best-online-brokerage-firms-ranked-by-retail-in?page_all=1

    Any thoughts on who you would go with? I trade myself and would like to have free ETF trades (which makes me lean toward Fidelity). Besides fees, anything else you would consider? They all seem to be very similar to a self-directed investor?

  93. Ive had my eye on BBL for the past couple of weeks. Would love to add it to my portfolio. Present value looks very tempting.

    Best wishes
    R2R

    ps: Man…thats a lot of comments to scroll through 🙂

  94. Nice purchases. I’m debating on adding some ARCP or O to my portfolio. My only REIT is OHI since I own physical real estate. I’ve sold a put already and if ARCP drops much more I’ll probably make a purchase.

    As for BBL, I’ve owned it a while and will likely buy a little more while it’s trading at these levels. The market did not like the demerger talk. We’ll see how it plays out but I think this could be a good opportunity to initiate a purchase or lower your basis.

    Thanks for the analysis. I need to catch up on some of your other posts.

  95. Ravi,

    Haha. I think we’re both growing pretty nice money trees already. 🙂

    That’s a good question there, as I’m going to have to start looking into a second brokerage very quickly here. I like four things: low fees, physical branches, capital stability and history of such (no new kids on the block), and good customer service. That being said, Fidelity, TD Ameritrade, WellsTrade, and Schwab are all interesting to me. They all have solid asset bases behind them, branches here in Sarasota, and competitive fees. I’d prefer to open an account with TD Ameritrade or WellsTrade because I’m a shareholder in TD and WFC, but if another provider is far more competitive and better for my wealth, then that’s where I’ll go.

    Best wishes!

  96. R2R,

    I agree. I think the present value is compelling, even with commodity pricing/oversupply/China issues. The short-term pain is worth the long-term gain, in my view. 🙂

    Thanks for dropping by!

    Cheers.

  97. Brent,

    I can imagine you’re a bit more lukewarm on REITs than I am with your substantial physical real estate assets. I would feel the exact same way. Even though I don’t own a house or rental property, I still want to keep my REIT exposure a bit low to factor in for lower growth prospects and dilution. Definitely less than 10% over the long haul.

    I hear you. They were sliding a bit, and then that demerger announcement really let the wheels loose. Of course, iron ore prices aren’t helping either. But this volatility appears to be a long-term opportunity. Anything could happen in the next year or two, but I truly believe this will be a more profitable enterprise 10 years from now.

    Best regards!

  98. DM,
    Another nice add!!! Just added BBL this morning as well as CVX. Couldn’t be more happier to add to these great companies @ great prices!!!! I’ve been waiting along time to put some capital to work and with the volatility of late, its been a great time to add. Whats your thoughts?

    All the best,

  99. j-harr,

    I was actually just writing about Chevron for Daily Trade Alert. I think it’s about ~10% undervalued here, which is an opportunity to buy into a high-quality supermajor at a discount. Nice. 🙂

    I’ve probably already put most of my available capital for this month to work. I could maybe stretch for one more purchase, but I’d have to see an extremely compelling investment case. Otherwise, I’d prefer not to dip into my cash reserves. We’ll see.

    Cheers!

  100. Nice, Certain names are definitely on sale! Whats not to like with CVX!!!! Also looked @ DE but decided on BBL. I think they’ll still be time to fulfill a position there. Hopefully we stabilize after this pullback?

    Thanks for the reply,

  101. I tried to purchase BBL right before close yesterday and accidentally purchased 30 shares of BHP…doh! Think this is worth holding onto? Or should I just cut my losses and then go buy BBL?

    P.S – I just stumbled onto your blog about a month ago and I’m pretty much addicted now. Keep up the great work…I’ll just follow your lead, lol.

  102. Clint,

    That’s unfortunate. If I were you, I would sell BHP and buy BBL. They represent equal ownership in the overall company of BHP Billiton and its earning power, but BBL trades at a discount. Thus, the BBL yield is higher, which means more dividend income. Plus, it’s not taxed by a foreign entity due to our tax treaty with the UK. Your BHP dividends, if you hold, will be taxed by the Australian government, which you will then have to recoup at tax time (assuming you hold in a taxable account).

    Best regards.

  103. DGI,

    I hear you. I suppose it’s a bit hard to gauge the dividend growth prospects for a commodity producer. But I look at BBL like the oil supermajors where it’s possible that conservative management can build lengthy dividend growth records, even with heavily fluctuating commodity prices. And BBL might be in an even better position than some of oil companies due to less major competition for some of the resources they mine for. I guess we’ll see just how committed BBL is to growing the dividend after the drop of both oil and iron ore lately.

    Let’s hope we get that correction. I’ve been busier than usual with capital deployment lately. Nothing like a good stock sale to get me to whip out my wallet.

    Appreciate you stopping by. I’m trying to keep the snowball rolling! 🙂

    Best wishes.

  104. Hi DM, Thanks for sharing the details, i know we want to have a long term view, however with today, news about the accounting error going back to 2013, is it time to review the strategy and sell ? or buy more?

  105. DivInvestor,

    Well, you ultimately have to really figure out what’s appropriate for yourself, considering your risk profile, time horizon, overall investment in the company, etc. Nobody can/should ever tell you what you should be buying and/or selling.

    I can advise you that I’m not selling. The accounting issues looks like they overstated AFFO by about 10% this year. That’s pretty serious stuff, so that should not be taken lightly. We don’t yet know what’s wrong/different with 2013 numbers.

    However, a 10% revision to AFFO led to a 30% drop in the stock. And that’s a drop from an already cheap valuation, on a peer comparison basis. Is that appropriate? Hard to say. Certainly a good chunk of that is due to questions surrounding management competency, ability, and honesty. And rightfully so. But where does ARCP go from here? I think another issue might be more difficult access to credit markets. Could be a deep rabbit hole.

    However, I’ve noticed during my last few years of investing that the pendulum can swing too far in one direction, on either good or bad news. ARCP appears to be getting the brunt of that pendulum right now.

    But I’m not interested in selling because, in the end, ARCP still has an enviable portfolio of properties that still send the company rent checks. And ARCP still sends out a good portion of those rent checks to investors in the form of dividends. So I’ll continue to collect my monthly check and see if management can clear this major issue up. Now, if the dividend is cut I’ll probably have to exit.

    Just my thoughts on it.

    Best wishes!

  106. Agreed and thanks for the reply. Will wait and see. Cut in divide might be a deal breaker. Again thanks for your reply.

  107. Just now looking at an entry point for BBL, BHP Billington. I think I have an understanding why they are running downhill as fast as they are, but at one point, and I cannot know when, things will turn around. Commodities are in far less demand now, since the EU, Russia, China and even to some degree India and EM countries have all slowed.

    M* has them rated at 5* with a forward P/E of 22.1 and a FV estimate of $70. I haven’t yet read the S&P rating. Somebody tell me when the world will start demanding more commodities…………:)

    I think the dividend is a nice add to a div portfolio but I don’t want to rely on that only. I guess the best entry point is when we hear the rumblings of growth in all the above countries mentioned. At present BBL is down almost to the 52 week low. and while that sounds great, it could have further to fall. How much further? Well unfortunately I have over polished my crystal ball to the point is is now foggy.

  108. PC,

    “Well unfortunately I have over polished my crystal ball to the point is is now foggy.”

    Same here, which is why I don’t worry about that stuff. I simply ask myself if the odds are good that the world will continue to need iron ore, potash, oil, coal, and other minerals for the next 20 to 30 years. And I think the odds are good. Demand for these resources fluctuates over time. Right now that demand appears to be down. So BBL is cheap. Later, demand will go back up and BBL will be expensive again. I’d rather buy when it’s cheap.

    Best wishes.

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