How safe is the BHP dividend payment?
BHP (LON:BHP) is a large cap Integrated Miner with operating segments across Petroleum, Copper, Iron Ore, and Coal. For the six months ended 31 December 2018, BHP Group PLC revenues increased 1% to $20.74bn and net income before extraordinary items increased 10% to $4.06bn.
The group pays out an attractive rolling dividend yield of 8.87% - I'd like to know how safe this dividend is. Dividend cover (earnings per share divided by dividend per share) of two times or above is strong. Anything below one and a half times suggests we need to look a little closer.
Computing BHP's dividend cover ratio
Poor dividend cover means that a small decline in earnings could consign your dividend payment to the scrap heap. It could also mean that the company is forgoing profitable investment opportunities that could generate future earnings growth. With that in mind, let’s take a look at 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 (TTM) EPS is $1.75 and its TTM dividend per share is $1.18.
Divide the former by the latter and we get a trailing twelve-month dividend cover for BHP of 1.48. 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.
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