Why BHP Billiton Limited’s share price collapsed today

Credit: Lucas Walters

BHP Billiton Limited’s (ASX: BHP) share price has continued its rapid descent today with shares falling another 3.7%, compared to a 0.7% jump for the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).

With the miner’s share price now hovering below the $19 mark for the first time since 2008, BHP Billiton has no doubt caught the attention of investors looking for a bargain. The problem is, the shares could well have further to fall.

Unfortunately, there is no one factor pulling BHP Billiton’s shares lower. Of course, the primary catalyst has been crashing commodity prices which resulted in an enormous contraction in the miner’s group earnings during the 2015 financial year. Iron ore and oil prices are both hovering around multi-year lows with most analysts expecting even more pain in the months, and perhaps even years, to come.

Then there’s the issue surrounding BHP Billiton’s dividend yield. Although the miner’s shares are currently trading on a monstrous 8.9% fully franked dividend yield, it is widely expected to scrap its ‘progressive dividend’ policy in the near future to protect its balance sheet and credit rating.

The recent disaster involving one of its mines at Samarco, Brazil, has impacted investor sentiment even further. There are still numerous question marks surrounding the circumstances of the catastrophe, including the cause of the incident and the costs and potential fines that BHP will be responsible for paying as a result. Early estimates suggest the total amount will be north of US$500 million, which is the last thing BHP Billiton needs right now.

Of course, there could well come a time to buy BHP Billiton’s shares. But today, it seems there are far too many uncertainties which could drag the shares even lower. I’m not a buyer, and think investors should focus their attention elsewhere, for now.

A Billionaire's Investing Secrets - and 2 New ASX Ideas for You

Now you can discover the investing secrets of $60 BILLION man Warren Buffett -- widely recognized as the world's greatest investor. Plus, you'll get two brand new ASX ideas! Your copy of The Motley Fool's brand-new report "The Wisdom of Warren Buffett -- Plus 2 ASX Shares Buffett Could Love" is FREE when you click here.

Motley Fool contributor Ryan Newman has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.