WSJ: After Lawsuit over Dam, BHP and Vale Shares are falling and future dividends are in question

On Monday, contributors from the Wall Street Journal wrote that the Brazilian government issued a statement saying that it would sue BHP Billiton Limited ADR BHP and Vale SA VALE due to a deadly dam failure that killed 13 people. The dam failure displaced hundreds of Brazilians and contaminated the Rio Doce River with a toxic waste. This incident has caused shares of BHP Billiton and Vale to fall to 10- year lows as both companies equally own Samarco Mineraco SA, which is the entity responsible for the incident.

Rhiannon Hoyle and Alex Macdonald of the Wall Street Journal wrote, “The dam incident has put new financial pressure on BHP at a time when it was already challenged by falling prices for the commodities it sells, especially iron ore...The problem has prompted BHP Billiton’s shareholders to query whether the company can sustain its dividend payout, among the highest in the industry.”

Falling iron ore prices have been hurting BHP’s profitability and BHP chairman Jacques Nasser had to issue a statement saying that BHP will not change its dividend policy until early next year at the earliest.

The lawsuit is demanding damages of $20 billion Brazilian reals (roughly $5.2 billion dollars) and will be used to fund cleanup and rehabilitation efforts for damaged villages surrounding the dam.

BHP Billiton closed on Friday at $26.98 and was unchanged or the day.
Vale SA closed at $3.57 and was unchanged for the day.