Australia and New Zealand Banking Group and BHP Billiton Limited at new lows on dividend worries

The share price of Australia and New Zealand Banking Group (ASX: ANZ) is currently trading 0.2% lower today to $23.45 after falling as low as $23.32.

Meanwhile, BHP Billiton Limited (ASX: BHP) shares have jumped 2% today to $14.50 after hitting a fresh low yesterday of $14.06 – these are levels not seen since 2004!

While there are multiple reasons for the slide in the share prices of ANZ and BHP, investor concern over the sustainability of their dividends has arisen in recent days.

Here’s what you need to know:

According to a report in the Australian Financial Review (AFR), investment bank UBS is expecting BHP to slash its interim dividend in half when it announces its half-year results in February. This implies a cut from 62 cents per share (cps) in the prior period to just 31 cps!

UBS’s forecast suggests a huge gap between what it believes will occur and what the market consensus is currently factoring in. According to data supplied by Morningstar, one analyst consensus estimate is for a total dividend this financial year of 140 cps.

Meanwhile, a separate report in the AFR has noted that broker Morgan Stanley believes ANZ “will cut its dividend this year in the face of rising losses in Asia and lower-than-expected income from its global markets business.”

Morgan Stanley is forecasting a total dividend for the year from ANZ of $1.55, which implies a double-digit percentage reduction to the distribution.

The views of these analysts who watch ANZ and BHP respectively very closely should act as a reminder to investors that simply being “blue chip” is not enough when it comes to picking stocks with maintainable dividends.

It’s also a reminder that as the outlook for a company changes so does the market’s appraisal of value. As such, buying the dips is unlikely to be a successful strategy in all instances.

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Motley Fool contributor Tim McArthur 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. 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.

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