Summary: For BHP Billiton, loss of cash flow from the Samarco iron ore mine following a ruptured dam and mudslide will add to the potential need to cover this year’s dividend with debt. This would raise a red flag at ratings agencies, which are already concerned about the company’s rating because of low commodity prices. Investors are increasingly confident the company’s promise of a progressive dividend will be dropped.
Key take-out: BHP shareholders have been more concerned than directors about unsustainable dividends and might even welcome the announcement of a more realistic dividend policy.
Key beneficiaries: General investors. Category: Mining stocks.