Bhp (ASX:BHP) cover image
402 Reads (2 mins read)

Can you count on Bhp's (ASX:BHP) dividend payment?

2nd Apr '19 by Jack Brumby

The Economist wrote in the aftermath of the 2008 financial crash that the crisis had led to the largest number of dividend cuts and suspensions since the Great Depression of the 1930s.

Income investors were reminded of the fact that dividend payments are far from certain. This type of risk doesn’t go away. People just forget about it for a while. Then, before you know it, one of your “safe” companies has issued a profit warning and is cutting its dividend.

One of the quickest ways to kick the tyres on your current dividend generators is to check the dividend cover (earnings per share divided by dividend per share). Dividend cover is the inverse of the dividend payout ratio. Dividend cover of two times or above is strong. Anything below one and a half times - as is the case for BHP (ASX:BHP) - should be stirring us to investigate in more detail.


Calculating Bhp’s dividend cover ratio 

A low level of dividend cover means that a small decline in earnings could consign your dividend payment to the scrap heap. It happens all the time. With that in mind, let’s take a look at BHP’s (ASX:BHP) dividend cover.

We can get all the information we need to see if Bhp has an adequate level of dividend cover from the group’s StockReport. The group’s trailing twelve-month earnings per share is 1.67 and its trailing twelve-month dividend per share is 1.18. 

Divide the former by the latter and we get a trailing twelve-month dividend cover for Bhp of 1.41. This is below the 1.5 times cover limit that marks the point at which we should do some further digging on dividend sustainability and safety.

Income investing: what you need to know

For many investors, dividends are a vital part of their long-term strategy. That's why we have created a variety of income-focused stock screens, such as the Best Dividends Screen, to identify promising candidates for income portfolios. Take a look and see if any of the qualifying stocks might be worthy of further research.

As for Bhp (ASX:BHP), you can find a wealth of financial data on the group's StockReport, including information on the group's past and forecast dividend payments. If you’d like to discover more about dividend investing, you can read our free ebook: How to Make Money in Dividend Stocks.

Share this article
As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.
Share Price
Change Today
Bhp ( )

Stockopedia is here to help individual investors beat the markets by being the very best in stock analysis, research & community. Take a 30 day free trial of our extensive multi-award winning service and find out why more than ten thousand global investors can't live without it.

© Stockopedia 2021, Refinitiv, Share Data Services.
This site cannot substitute for professional investment advice or independent factual verification. To use it, you must accept our Terms of Use, Privacy and Disclaimer policies.