Tuesday, June 4, 2013

Recent Buy: BBL

BHP Billiton plc Jun 3, 2013: Bought 43 shares of BBL at $58.39 per share.

BHP Billiton is a diversified natural resources company and one of the world's largest producers of major commodities, including aluminium, coal, copper, iron ore, manganese, nickel, silver and uranium. BHP Billiton is a dual listed company comprising of BHP Billiton Limited (BHP) and BHP Billiton Plc (BBL). I've acquired shares in BBL, an American Depository Receipt (ADR) listing of BHP Billiton Plc available on the NYSE.

Yesterday I shared the seven DivGro candidates that are at the top of my June dashboard. BBL is one of my favorites: it trades at a deep discount and has been growing its dividends aggressively. I also like BBL because it increases my sector diversification. So, today I decided to buy BBL, the 10th stock to be added to DivGro!

Analysis


With its 10-yr streak of dividend increases, BBL was recently promoted to Dividend Contender status. It pays dividends semi-annually in March and September. At $58.39, BBL's annual dividend of $2.28 yields 3.90%. Over the past 10 years, BBL has outperformed the markets handily, returning 464% compared to 69% for the S&P 500.

Fair value estimates for BBL vary from $71.52 (Graham Number method) to $80.00 (MorningStar). My purchase price of $58.39 represents a discount of 31.84% to the average of these estimates ($75.76).

The following table provides some key statistics for BBL:
The sum of BBL's dividend yield and its 5-yr dividend growth rate is 22.93%, well above the 12% required by the Chowder Dividend Rule. BBL's 5-yr total payback percentage is 23.05%, also well above the 16% as required by my selection criteria
BBL passes the following of my selection criteria:
  • Dividend Payout ratio is 63.33% (below 65%)
  • 7-year weighted average dividend growth rate is 18.15% (at least 7%)
  • Forward P/E ratio is 12.44 and the trailing twelve month (TTM) P/E ratio is 15.96 (below 16%)
BBL's Debt to Equity ratio is 53% (not below 50% as required by my selection criteria). My confidence in continued dividend increases is below 70%.

BBL passes 8 out of 10 of my selection criteria and earns 6 stars: (*******)

Other ratings for BBL


(see Recent Buy: CVX for details on these ratings)
MorningStar Rating (*****)
The Motley Fool's CAPS Rating(*****)
S&P Capital IQ's Stock Report(*****)Hold 

Final Remarks


43 shares of BBL represent $98.04 of expected annual dividend income. For the 2013 calendar year, this purchase adds $49.02 of expected dividend income, for a total of $1000.67 for 2013.

I now own shares in 10 different companies in DivGro, which takes care of one of my goals for 2013!

Full Disclosure: Long BBL

3 comments :

  1. With the World Bank cutting growth for China and Europe I would say there is still more time for this stock to get cheaper...but in the long term you will more than likely be up-


    http://www.chicagotribune.com/business/sns-rt-us-worldbank-globalbre95b1a8-20130612,0,3294040.story

    ReplyDelete
    Replies
    1. Thanks for stopping by, Philip --

      Indeed, BBL has pulled back since I've bought it, along with the entire market. And it may get even cheaper. With dividend growth investment, though, I'm more interested in collecting growing dividends over the long term. As long as BBL continues to pay and grow its dividend, I'm good with my investment.

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