Market focus on BHP Billiton's dividend is misguided, Citi says

Given BHP Billiton's rate of 'cash-burn', investors were right to worry that 'something had to get cut' but markets were misguided in focusing on the dividend, what mattered most was minimising the damage to the balance sheet.

In the past, the miner had stressed the importance of cash-flow to pay for its main objectives: 1) spending SIB capex for safe operations; 2) maintaining a strong balance sheet; 3) progressive dividend policy; 4) growth capex and; 5) returning excess capital through capital management, Citi said.

With an expected rate of 'cash-burn' after capital expenditures and dividends of approximately $3bn a year, something did indeed have to give, the analysts said.

However, "market focus on dividend seems misguided in our view, as focus should really be about how much capex gets slashed to minimise balance sheet damage," Citi analysts Heath R jansen and Harsh Bardia said in a research note sent to clients.

The broker stood by its 'neutral' recommendation.