Investors who own shares in BHP Billiton Limited (ASX: BHP) know exactly what it's like to hold an underperforming stock.
Not only has it lagged behind the S&P/ASX 200 Index's (Index: ^AXJO) (ASX: XJO) returns since the beginning of the year, but it has actually fallen in value over the last three and five years – save for any dividends it has paid along the way.
However, those times could be nearing an end. While the short term could well remain volatile due to the tumbling iron ore and coal prices, the long term is looking a lot brighter.
For starters, the miner is heavily focusing on reducing costs and its net debt, at the same time as improving productivity and simplifying its business model around its "four pillar" strategy.
The company is due to deliver a production update on 23 July while it will deliver its preliminary profit announcement on 19 August. At this time, we could well see its net debt fall below US$25 billion which would likely see BHP initiate a share buyback program or a special dividend – either of which would boost shareholder returns.
And that's not all – BHP is in a box seat position to benefit from skyrocketing demand for coal and potash over the coming decades. While the near term could remain volatile, the long term is still looking very bright – particularly with its 3.4% fully franked dividend yield.
Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) both delivered their production updates yesterday, which can be viewed here and here.
An even better bet than BHP Billiton
BHP Billiton remains my favourite resources stock due to its high level of diversification and low-cost activities.
