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TheStreet Open House

Natural-Resources Giant Flashes a 'Buy' Signal

Stocks in this article: BHP

NEW YORK ( TheStreet) -- Let's put it this way, I'm one of those analysts who "eats his own cooking." Put another way, I "put my money where my mouth is." On the other hand, I like to remind readers to do their own thorough due diligence before investing a dime.

Let me also remind you that I'm the same person who proclaimed the death of gold and silver stocks in an ironic and perhaps desperate attempt to jump-start this comatose sector. So don't automatically do as I do, for I'm often early to the sector "resurrections."

Now that I've said all that, I've also seen "bottoming" formations where the stock of a cash-generating sector leader gets so oversold that I want to start accumulating shares and collecting dividends. That's the way I'm starting to see BHP Billiton (BHP).


BHP is a leading global resource company, and I like the way the company describes itself at its user-friendly website: "We are among the world's largest producers of major commodities, including aluminum, copper, energy coal, iron ore, manganese, metallurgical coal, nickel, silver gold and uranium along with substantial interests in oil and gas."

Please read that again and ask yourself where you're going to get all those valuable, essential commodities by buying the shares of just one company. The company continues: "We are a global organization headquartered in Australia and with over 100 locations throughout the world, our success is underpinned by the 100,000 employees and contractors that work at BHP Billiton."

Have I mentioned that's how they can pay a 3.26% dividend, which represents a payout ratio of only 38%? With well over $5.2 billion in total cash as of the end of 2012 and trailing 12-month operating cash flow of more than $18.5 billion, it is reasonable to expect future rising dividend payouts.

"We have an unrivaled portfolio of high-quality growth opportunities that will ensure we continue to meet the changing needs of our customers and the resources demand of emerging economies at every stage of their growth," BHP's leadership proclaims. The company also boasts some impressive company credibility.

"We have a proven record of delivering superior shareholder returns. We do this through the disciplined execution of our unchanged strategy of owning and operating large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography and market."

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