BHP Billiton's decision to restructure into two companies and delay a buyback has split growth-hungry investors.
Last week the world's largest mining company confirmed a $US15 billion ($16 billion) spin-off freeing up cash flow for BHP (ASX: BHP)and allowing it to continue to expand its four key commodities: iron ore, petroleum, copper and coal, with potash lingering as a fifth option.
The new de-merged company with assets spanning aluminium, manganese, the Cannington silver mine and part of the coal business, is tipped to yield up to $US3.5 billion of annual productivity gains by the end of the 2016-17 financial year.
Much of the disappointment after BHP's results last week was due to the lack of a mooted $US3 billion buyback.
According to Deutsche Bank, the trigger for fresh capital management initiatives from the Melbourne-based miner will now likely be delayed until 2015.
On the buyback side, Deutsche expects BHP may now take action in the first half of next year.
That will largely hinge on net debt within BHP falling below a targeted $US25 billion level that the miner set before embarking on a new round of either buybacks or special dividends.
If NewCo is approved and demerged as expected in mid-2015, BHP is tipped to boost its dividend ratio to about 55 per cent from 48 per cent from the 2013-14 financial year.
Shareholders in 2013-14 are to be paid a final dividend of US62¢ fully franked, or $US1.21 over the full year, making an increase of just 4 per cent year-on-year.
Operationally, investors will be looking to the miner's ability to boost iron ore output to 290 million tonnes a year from 270 million tonnes at an even cheaper cost than $US40 a tonne currently.
Iron ore prices have slipped a third this year to $US90 a tonne. However, even at these levels BHP and rival Rio Tinto continue to profit handsomely.
