The BHP Billiton Limited (ASX:BHP) share price just hit $34, and here’s why it could go higher

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ASX:BHP

The BHP Billiton Limited (ASX:BHP) share price is up a further 48 cents or 1.43 per cent to $34.03 in Wednesday afternoon trading, an almost 4 year high.

ASX:BHP

Source: The Capital Club

Speaking at the Bank of America Merrill Lynch Global Metals, Mining & Steel Conference in Florida, BHP Chief Executive Officer, Andrew Mackenzie said:

“BHP is set-up for future success. We have a simple, unique portfolio of the very best assets, diversified across attractive commodities.

“We have maximised operating cash flow as we have lowered costs through productivity; we have been disciplined and transparent in capital allocation; and we have identified new options to increase value and returns.”

Mr Mackenzie said BHP has reduced net debt by over US$10 billion, returned US$8 billion to shareholders and replenished the pipeline with new opportunities.

Potential to add 40 per cent value

“This pipeline has the potential to add a further 40 per cent to the value of BHP, subject to our strict capital allocation processes,” said Mr Mackenzie.

In a presentation to the conference, Mr Mackenzie said that “value and returns are at the centre of everything we do.”

Source: Company presentation

A report in the AFR quoted Mr Mackenzie as saying BHP expects a larger proportion of future free cash flow to find its way back to shareholders.

According to Commsec estimates, BHP shares trade on a forecast price to earnings ratio (P/E) of around 14.6 times and a forecast fully franked dividend yield of around 4.5 per cent.

Over the past year, BHP shares have gained more than 42 per cent, making them one of the top performing ASX 200 stocks in that time.

Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at brucej@thecapitalclub.com.au