10 year return of BHP and RIO

Source: Google Finance

• Both BHP and RIO now have lower share prices from 10 years ago
• Despite the focus on BHP's recent falls RIO has performed worse over the 10 year time frame.
• BHP's falls this year not nearly as severe as the falls in RIO during the GFC.
• Share price of RIO still above its GFC low where as BHP is falling beneath its GFC low

Dividend yields of top 10 ASX

1.   BHP    9%
2.   NAB   6.6%
3.   ANZ   6.5%
4.   WBC  5.7%
5.   WOW 5.7%
6.   TLS    5.6%
7.   CBA   5.2%
8.   WES   5.2%
9.   MQG  4.4%
10. CSL    1.6%

• BHP leads the list with the growing likelihood that its dividend will be cut.  A decision on this is not expected until February and commodity prices can fluctuate dramatically in the space of two or three months
• NAB and ANZ have yields of about 6.5%.  There is also talk that their dividends could be cut due to the large capital raisings this year.  This is looking increasingly unlikely in the short term as their share prices have rallied over the last couple of weeks.
• WOW 5.7%.  Who knows what will happen with WOW.  Who will the new CEO be? What will happen to Masters?  What will happen to Big W?  Will second quarter sales be positive?  
• MQG and CSL with lower yields have been by far the best share price performers over the year.

Top 10 ASX by market cap - November changes

                 Nov 9th         Nov 30th

1.   CBA     130b              136b

2.   WBC    100b              107b

3.   ANZ     74b                79b

4.   NAB     74b                78b

5.   TLS      64b                66b

6.   BHP     70b                59b

7.   CSL     44b                46b

8.   WES    43b                43b

9.   WOW   30b                30b

10. MQG    27b                28b

• The big four banks have all increased their market cap over the last three weeks.
• ANZ has just edged ahead of NAB
• BHP has lost 11b in market cap in the last three weeks
• WES and WOW both remain unchanged.

15 year return on BHP, ANZ and WOW

Three different companies in three completely different sectors: Mining, banking and retail.  All currently experiencing their own headwinds and difficulties.  Which has performed best over the long term?

ANZ

Source: Yahoo Finance

WOW

Source: Yahoo Finance

BHP

Source: Yahoo Finance

If measured from the year 2000 then Woolworths (WOW) is a long way ahead of ANZ and BHP.
WOW has increased its share price five fold and don't forget the dividends as well.  ANZ and BHP have increased their share price roughly half as much as Woolworths (WOW)

When measured from 2005 the results are much the same.  Woolworths (WOW) has risen 60% where as ANZ and BHP have only risen 30%.

From 2010 everything has changed.  ANZ is up a bit, WOW is down a bit and BHP is down a lot.

7 year returns on BHP, FMG and RIO

Trevor Sykes writing for the Fin Review yesterday suggested that BHP is a red hot buy.  His main argument centred on cashflows and that its investing outflows are largely voluntary.  He states that if BHP stopped investing altogether for a year they would be "knocked over by the wall of money."

Not that the market seems that interested this morning.  With the spot price of iron ore down again they are drifting around the $20 mark.

Seems like the main game everyone is playing is trying to "pick the bottom" of the BHP share price.  Seven years ago in the depths of the GFC the share price briefly touched the $20 mark before doubling in price over the next few years.  That low was also at the end of November almost seven years ago to the day.

Here is a chart showing where the share price has gone since.

Source: Yahoo Finance

So where would we be today if we invested in some resources companies seven years ago.  Pretty much back where we started.  This chart shows how your returns on BHP, RIO and FMG would have fluctuated over the seven year time frame.

Source: Google Finance

With FMG you would still be slightly ahead and there would have been plenty of opportunities to sell out at a 200% or more return.

BHP, despite their current woes, has consistently outperformed RIO on the seven year time frame.

BHP - still above $20 for now

Source: Yahoo Finance

BHP over the last three trading days.
Opens well down and then shows some steady gains during the day.

Meanwhile BusinessDay is reporting that commodity markets are "too pessimistic."  It notes that the recent declines in the prices of metals have been much smaller than that experienced earlier in the year.

BHP vs FMG since July 1st

Source: Google Finance

Since July 1st FMG is up 23% and BHP is down 23%.

Who would have thought!

Top 10 ASX by market cap

1. CBA 130b
2. WBC 100b
3. NAB 74b
4. ANZ 74b
5. BHP 70b
6. TLS 64b
7. CSL 44b
8. WES 43b
9. WOW 30b
10. MQG 27b

• The big four banks still easily account for the bulk of the market.
• ANZ has slipped the most of the four banks
• BHP has fallen from 2nd to 5th in a year (share price down 30% in a year)
• Macquarie (MQG) the biggest gain (share price up 30% in a year)
• CSL continues to move up (share price up 20% in a year)

BHP dividend yield creeps up to 7.4%

BHP shares are once again testing new lows.  After rising above $25 last month they are now back around $22.  Consequently the dividend yield is up to 7.4% fully franked.  No doubt debate will once again continue on the sustainability of their progressive dividend policy.  If the share price continues to fall then it's a very clear signal that market participants are losing faith in the policy.

Here is a monthly chart of BHP going back to 2009.

Source: Yahoo Finance

• The solid bull run after the GFC saw its shares peak in April 2011 at $46.
• The next 15 months to June 2012 saw 12 monthly "falls" and 3 monthly "rises"
• The following 2 years sees the price edge up from $30 to $35.

The next fall from August 2014 looks rather similar to the previous one just described.

• The next 15 months up to today sees 11 monthly "falls" and 4 monthly "rises"

The scale of the two falls are also quite similar.

• April 2011 to June 2012 sees the decline from $45 to $30
• August 2014 to today sees the decline from $35 to $22

While history does not dictate future share price movements it can provide a useful guide to keep things "in perspective".   If the current price falls mirror the declines of 2011/12 then perhaps the downside risks are starting to become limited.

BHP share price or dividend yield?

Fairfax columnist Michael Pascoe wrote an interesting piece a few weeks back with regard to the BHP dividend.  As most are probably aware there is much debate surrounding their "progressive dividend policy"and the current state of commodity prices.

With the BHP share price trending down over the previous six months and management steadfastly saying that dividends will not be cut, then at some point something has to give...  The share price or the dividend.

Or to quote Pascoe "Believe BHP and it is one of the great all-time buying opportunities. Believe Mr Market and that dividend is going to be reduced, meaning BHP shares might still be a reasonable buy but are not amazing."

Pascoe wrote the article on September 30 when the share price was around $22 and the dividend yield was 7.7% before franking credits.  Any further falls in the share price and I think it would be a pretty safe bet to side with Mr Market.

But the passage of time has seen a small bounce (10%) in the share price up to $25 and the dividend yield consequently dropping down to 6.9%

Source: Google Finance

So maybe BHP can win over Mr Market?  You be the judge and we'll take another look in a few months time.