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BHP expected to increase dividends

When mining heavyweight BHP Billiton (ASX: BHP) reports its annual results on Tuesday, it is expected that the group will succumb to investor demands for an increase in dividends as part of its “progressive’ dividend policy.

Analysts expect the group to announce profit of just US$12.6 billion for the full year – a miserable 26% below last year’s result. Concurrently, the group’s dividend payout is tipped to increase to US$1.18 per share for the full year, compared to US$1.12 per share last year – a jump of 5.3%. As highlighted by The Australian, this would mark the lowest growth in dividend payout in more than a decade for the group.

With the mining boom now considered to be well and truly a thing of the past, miners have maintained a heavy focus on increasing shareholder value and ensuring long-term sustainability, which it will aim to achieve by cutting costs and unnecessary capital spending.

BHP, for instance, flagged that it intended to cut costs from a peak of US$22 billion annually to around US$15 billion within the next two or three years. Rio Tinto (ASX: RIO) also stated that it wished to cut annual costs by up to $5 billion by the end of 2014.

Foolish takeaway

Whilst the company’s share price has already adjusted to the market’s expectations of a lower profit and slightly increased dividend, it will be other key factors that investors will be really looking out for on Tuesday. For instance, whether the market reacts positively or negatively to BHP’s full-year report will likely depend on the company’s capital expenditure plans for the coming year, its progress in cutting costs, as well as its intentions regarding the Jansen potash project in Canada.

Until further details such as these are unveiled, it may be wise to remain on the sidelines, or else invest your hard-earned money elsewhere.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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