When the BHP Billiton Limited (ASX: BHP) share price fell below $20, many market commentators were signalling it was time to buy the giant resources company.

So far, they’ve been wrong, with the share price plummeting below $15, currently trading at $14.16 and making new 10-year lows every day it seems. As colleague Ryan Newman explained today, BHP reduced its guidance for production of iron ore and onshore US oil production while also announcing hundreds of millions more in writedowns. That comes on top of its already US$7.2 billion writedown on its energy assets thanks to the crashing oil price.

The split off of South32 Ltd (ASX: S32) and its varied resources from coal to aluminium, manganese, silver and lead, zinc and nickel, saw a highly diversified BHP become focused on four (sort of five) major pillars, iron ore, copper, coal, and petroleum and potash. Unfortunately for BHP, the commodity prices for copper, iron ore and oil have plunged – and there appears little sign of a recovery – at least in the near term.

The giant miner has stuck to its guns over its progressive dividend policy which sees ever increasing dividends paid out every six months, but at some stage BHP will be forced to change its tune. The company is currently borrowing debt to fund its dividend and that can’t go on for long before rating agencies take a knife to the company’s credit rating. Both Moody’s and Standard & Poor’s have flagged the progressive dividend as a potential risk to its credit rating.

BHP has substantially reduced its capital expenditure over recent years, but to keep funding the dividend without borrowing would mean virtually spending nothing while commodity prices are low. That would in turn damage the long-term prospects for BHP’s assets.

Investors looking at the monster dividend yield with relish shouldn’t be fooled (lower case ‘f’). BHP will have no choice but to cut its dividend. When that comes, it could even exert more selling pressure as income investors abandon ship, sell out and look elsewhere.

Of course, much of the market would applaud the move as they can see the problem staring them in the face, even if BHP management wants to ignore it.

Unless iron ore and oil prices do the unexpected and begin to steadily rise, BHP’s revenues, earnings and profits are likely to remain low for some time. With steel demand and production falling, and China moving away from its industrialisation to a more consumer-led economy, commodities prices may not recover for many years – even decades.

Analysts appear to be slowing changing their tune on the big miner too. Of the 24 analysts who cover the company, 8 analysts rate the shares as a ‘hold’ while 4 have it as an ‘underperform’ (sell) according to Reuters. Just one analyst thought it was a ‘Sell’ 3 months ago.

Foolish takeaway

Iron ore, petroleum and potash accounted for 74% of BHP’s earnings before interest and tax (EBIT) last financial year. The prospect of low iron ore and oil prices for some years means investors are unlikely to see a material uplift in BHP’s earnings per share, and, therefore, the share price, for some time.

Investors also need to forget about BHP’s share price when it was above $20 or $30, and how far its fallen, and instead focus on earnings going forward.

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Motley Fool contributor Mike King has no position in any stocks mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.