The BHP Group Ltd (ASX: BHP) share price is surging to a one-month high today after the Big Australian declared a special dividend and released the results from its US$5.2 billion share buyback.
The BHP share price jumped 3.4% to $33.50 during lunch time trade when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index recovered from morning losses to trade up 0.5% at the time of writing.
The Christmas cheer that's infected BHP is spreading with the Rio Tinto Limited Fully Paid Ord. Shrs (ASX: RIO) share price rallying 2.2% to $76.24 while the South32 Ltd (ASX: S32) share price and OZ Minerals Limited (ASX: OZL) added around 1.5% each.
Special dividend giveaway
BHP will give shareholders a Christmas gift in the form of a fully-franked US$1.02 (circa $1.42) per share special dividend after it received overwhelming interest in its off-market share buyback.
The ex-dividend date for the special dividend is January 10 and eligible shareholders will be paid at the end of January.
The buyback will be scaled back as the miner was offered more shares than it could swallow. Shareholders will generally have 42% of the shares they tendered bought back by BHP if they elected to sell their holdings at the maximum discount of 14%.
Buyback details
This means the final buyback price is $27.64 and the franking component (paid in excess of the final price) is worth around $11.68 per share.
Shareholders who tendered their shares at the 14% discount or as a final tender price will have a priority allocation of 165 shares bought back before the scale-back is applied.
Those who tendered all their shares, and as a result of the scale back be left with 65 shares or less, will have all their shares bought back.
You can't rule out further capital returns from BHP in 2019 and analysts think its peer Rio Tinto also has room to hand capital back to shareholders.
What to expect in 2019
While the mining sector hasn't been immune to the recent market meltdown, I believe the outlook for the sector is brighter than for most other ASX shares in 2019 and I remain overweight on the sector (less so now as I have tendered my shares into the buyback but I do intend to top up my holdings).
Experts are expecting buybacks and capital returns to be a key feature for the ASX in 2019 and that extends beyond mining, although our big miners are probably better capitalised than most other sectors.
We might be in for a pretty soggy end to the year but there's reason to be upbeat about the outlook for the ASX share market in the new year.
