Will BHP fast-track a buyback?

A share buyback could be on the cards for mining-heavyweight BHP Billiton (ASX: BHP). Any buyback may be sooner than the market had anticipated with the miner looking to divest from some of its non-core assets.

Like others in the industry, BHP lagged the market substantially in 2013, returning just 1% compared to the S&P/ASX 200’s (Index: ^AXJO) (ASX: XJO) 15% return. Rio Tinto (ASX: RIO) also gained just over 1%.

Although the miner set itself the target of lowering its net debt figure to US$25 billion before considering capital management action, the company could look to kick-start a buyback program in order to boost shareholder returns.

BHP recognised US$6.5 billion in proceeds from six transactions in 2013 and could look to sell others this year including its Pakistan-based Zamzama gas stake or the United Kingdom-based Liverpool Bay. These sales could push its current net debt of around US$29 billion lower towards the US$25 billion mark.

Foolish takeaway

While there is the possibility that the company will undertake a share buyback program, it will also likely increase its dividend distribution in 2014, as a response to pressure from shareholders to increase returns.

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

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