Investors love for dividends is burning brighter as bond yields have crashed to new lows and there's one S&P/ASX 200 (Index:^AXJO) (ASX:XJO) stock that could leave us with a warm fuzzy feeling on Tuesday when it hands in its profit results.
The potential target of our affection is BHP Group Ltd (ASX: BHP) on a report in the Australian Financial Review that it's set to break not one, but two dividend records.
Great expectations could be pushing the BHP share price to outperform its peers today with the stock gaining 0.8% to $36.44 while Rio Tinto Limited (ASX: RIO) is climbing 0.7% to $85.30 and the materials sector is hovering around breakeven.
Record dividends
The Big Australian is tipped to pay a record smashing final dividend of US79 cents, according to analyst estimates by Citigroup, while UBS thinks it could be even higher at US82 cents a share thanks to BHP's anticipated best profit results in five years.
This also means full year dividends will add up to US$2.36 or US$2.39 per share, depending on which broker turns out to be right. Both estimates are above BHP's previous record of US$1.24 a share.
But dividends are only part of the capital return story for the world's biggest miner. It had returned more than US$5 billion to shareholders in December through a share buyback that included a large franking credit component following the sale of its US shale assets.
BHP's chief executive Andrew Mackenzie has promised to deliver sector-leading shareholder returns, noted the AFR, and there's more room for Mackenzie to extend his vow even as commodity prices have taken a hit from the ongoing US-China trade war.
Trade wars won't stop the dividend train
The darkening outlook for global economic growth has sent the iron ore price tumbling from around US$120 a tonne to somewhere in the US$80 plus per tonne range.
But BHP's coffers are still overflowing at these prices given that it is sitting at the bottom of the cost curve for the global industry.
The same also could be said for Rio Tinto, although it's final dividend that was topped up by a special payout disappointed the market earlier this month as Rio Tinto didn't announce any new capital return programs – at least not yet.
Rio Tinto returned US$13.5 billion to shareholders in 2018 and BHP could beat that by about US$1.5 billion for FY19 if UBS and Citi are right about the final dividend.
I am sure all shareholders of our major miners will be encouraging a bit of friendly competition in this area.
