A quiet night in international markets with the US far more interested in the total eclipse of the heart than the stock market for a change. Not much to go on here except results which will be dominated by BHP. Looks like expectations were too high yet again. We saw the same when Rio Tinto (RIO) reported. Even Fortescue Metals (FMG) was a little shy on the headline profit result but what really caught the markets eye is the dividend. FMG is throwing off huge amounts of cash and have little to do with it but give it back to shareholders, mainly Twiggy Forrest. Unlike many miners FMG has stuck to its knitting. It has not made any significant acquisitions or attempted to diversify away from iron ore. Why would it? The company has done an astounding job in driving costs down and is hoping to get them between $11-$12wmt. With iron ore trading at $75 the profit margins are huge. Debt is now well and truly under control and the cash pile is mounting. The company has no issues with the resource as the projects have an almost endless supply of ore. The question has always been would FMG diversify and embark on a cash splash which usually ends in tears or return the cash to shareholders? Yesterday we saw the answer to that. Dividends and shareholder returns. A great big fat 25c to finish making 45c for the year. You would have to believe that the company will reward shareholders in a similar fashion provided the iron ore price stays strong. FMG is almost a yield stock now. If it were to continue to pay over 40c in dividends then that would be fully franked dividend of nearly 7%. Who needs TLS?
Today all the action will be on results. On the back of BHP, we should see some weakness again. Still in the range for the ASX 200 but at the moment it is not about that. Ask BSL shareholders.
Iron ore up again last night +2.9% to nearly $80. We may even see BSL rally on this. The massive fall yesterday did seem overdone but a triple whammy of ACCC investigation, a change of CEO and a weak outlook can eviscerate a share price in seconds. A perfect storm of negativity. Expect a bounce in BSL though today.