BHP Billiton’s slashed divi leaves investors in a hole

The City turned the screw on miner BHP Billiton today as the Anglo-Australian blue-chip tumbled to annual losses of $5.67 billion (£4 billion) and slashed back its dividend.

Shares in the company sank by 3% or 26.55p to 768.45p today following dire numbers from the FTSE 100 giant, which has joined a host of industry peers including Anglo American, Rio Tinto and Glencore in cutting shareholder payments or scrapping them altogether.

Alongside the company’s first loss in 16 years, BHP chief executive Andrew Mackenzie hit the dividend with a bigger cut than expected, slashing it by 75% to 16 cents for the year, as well as ending its progressive payout policy.

That disappointed company watchers who were hopeful of a payout of around 35 cents.

Miners such as BHP are under increasing pressure as a slowdown in China’s economy results in lower demand for key commodities, such as iron ore and coal.

“We need to recognise we are in a new era, a new world and we need a different dividend policy to handle that,” Mackenzie said as the company warned of a prolonged period of weaker prices and higher volatility in the mining industry.

Ratings agency Standard & Poor’s cut its credit score on BHP earlier this month and warned that further action was likely unless the miner shored up its finances.

The huge losses included a $4.9 billion hit on BHP’s US oil and gas assets — already flagged up — as well as a $1.2 billion charge following last year’s dam disaster in Brazil at the company’s Samarco joint venture with miner Vale.

The bursting of the dam at Minas Gerais sent millions of tonnes of mine waste surging through the jungle, flattening a village with the deaths of 28 people and polluting the Rio Doce.

The bill could rise significantly as BHP and Vale are in negotiations with the Brazilian government over a potential $5.1 billion clean up and compensation fund.