The world's biggest miner BHP Billiton Limited (ASX: BHP) ended last week on a very positive note. Shares rose 2.33% late in Friday's session after the miner announced its interest in a demerger of a selection of assets. In comparison, the S&P/ASX 200 (INDEXASX:XJO) rose a mere 0.3%.
It is expected that such a move would unlock considerable value for shareholders while it would also allow the company to increase its focus on productivity and the performance of its largest businesses, being iron ore, petroleum, copper and coal, as well as potash.
We are likely to receive another update on this action when BHP delivers its full-year earnings report on Tuesday 19 August. However, that's not the only reason to like BHP Billiton as an investment. Here are three other reasons why the stock could be worthy of your money today…
- The miner seems to be getting on top of the issues that have caused it to underperform the market in recent years. It is heavily reducing costs and improving productivity while it is also much more conscientious regarding unnecessary capital spending. It is expected BHP will deliver a massive US$13.6 billion profit when it reports.
- The company is also tipped to improve its shareholder returns. To begin with, Morningstar's estimates suggest its full-year dividend will increase to $1.29 per share (a fully franked yield of 3.3%), while it is also tipped to announce a share buyback program worth at least $3 billion.
- With so many other Aussie blue chips trading on outrageous multiples, BHP is looking increasingly appealing as a foundation stock. It is also a much safer bet compared to Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG), thanks to its high level of diversification.
3 high-risk/high reward plays to beat BHP Billiton
I've long held that BHP Billiton is a good way investors can gain exposure to Australia's mining sector. However, while it is a relatively safe bet and can offer a decent dividend yield, its sheer size could limit capital gains over the coming years. As such, our top analyst Scott Phillips embarked on a search for the best of the best small-cap resources stocks that could reward investors handsomely in the future.
