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3 reasons to buy BHP Billiton Limited today

Shares in BHP Billiton Limited (ASX: BHP) have helped drive the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) 0.4% higher today, rising 30c or 0.8% and are now trading at $37.88. Today’s gain takes their total rise since the beginning of the month to 5.5% with the shares now sitting just 11c below their beginning price for the 2014 calendar year.

Although they aren’t as cheap as they were just a fortnight ago, there are still plenty of reasons to like the miner’s shares going forward. Here are three reasons why BHP would be a solid acquisition today…

1)  Competitive Advantage. Declining commodity prices will affect BHP’s margins in the near-term, but they could also force higher-cost producers out of the market. A number of Chinese iron ore producers have already closed their operations recently with the commodity trading below US$100 a tonne.

2)  Greater Production. BHP, along with fellow iron ore miners Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) are heavily ramping up production rates. This should see the miner’s margins improve which will help bolster earnings going forward.

3)  Yield. The stock currently offers a solid 3.3% fully franked dividend yield. In addition to the potential capital gains that could be made, that’s quite appealing considering the low interest rate environment!

3 Explosive small-cap resources stocks you NEED to know about

Based on its current valuation, BHP Billiton boasts a market capitalisation of $120.7 billion. While the miner is a strong core company worth holding for the long term, its ability to generate massive capital gains is limited due to its sheer size.

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

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