There’s a new kid on the yield stock block. Make room for BHP – if CEO Andrew Mackenzie can keep his promises, that is.
Paul Rickard has been following BHP and its increasing dividends for a while now. He reported that he was impressed with its interim result back in February:
- Underlying EBIT of US$9.2 billion, down 25.5%
- Capital expenditure of US$6.4 billion, down 23%
- Free cash flow of US$4.1 billion, up 21%
- Interim dividend up 5% to 62 US cents per share
- Net debt down by US$0.8 billion to US$24.9 billion, for a gearing ratio of 22.4%.
Six months ago, Paul pointed out its confidence in its dividend payment and this statement issued by the company – “we remain committed to at least maintain or steadily increase our base dividend in every reporting period”.
Of course, there are challenges for BHP – the falling price of its commodities immediately springs to mind, but it certainly is committed to its cost cutting program, as evidenced by announcements of job cuts in Melbourne earlier this week.
BHP will report its second half results on August 25 and Paul says that it’s very important that CEO Andrew Mackenzie “tells the market whether he thinks he can deliver sufficient production efficiencies to offset the revenue fall, thereby allowing BHP to meet its promise to pay its base dividend.”
If it doesn’t, or if it goes back on its dividend promise, Paul may well be the first in line at the class action lawyers.
New standards
The Australian Securities and investments Commission (ASIC), although not the official regulator for SMSFs – that mantle goes to the Australian Taxation Office (ATO) – recently issued some guidance for advice provided to SMSFs that trustees should also take note of.
There are two information sheets. Sheet 205 Advice on self-managed superannuation funds: Disclosure of risks (INFO 205) and Information Sheet 206 Advice on self-managed superannuation funds: Disclosure of costs (INFO 206).
Trustees should know that ASIC is sticking to its suggested establishment amount of $200,000. “An SMSF with a starting balance of $200,000 or below is unlikely to be in the client’s best interests and that advice to establish one below that threshold is more likely to be scrutinized by ASIC,” the regulator said.
Watch what head of SMSF at Westpac, Sinclair Taylor, had to say about the guidance here.
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