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BHP attacked over dividends

BHP Billiton has been forced to defend the size of its dividends and other cash returns by some angry shareholders at its annual general meeting.

The world's largest diversified resources company was accused of hoarding $5 billion in surplus cash when it should be paying a special dividend.

A 10 cent special dividend (overall cost $500 million) or 20 cents ($1 billion) were suggested by one angry shareholder.

He criticised the company's $US5 billion bet on unconventional gas through this year's US Fayetteville shale purchase, which it wrote down the value of by $US2.84 billion in August.

"This great bunch here (BHP board and management) with all their knowledge rushed into US shale oil," the shareholder said at the AGM.

"We don't get enough, why aren't we getting more?

"Instead of 33 per cent (dividend yield relative to share price) we should be getting 45 per cent, why don't we get special dividends instead you are starving and strangling us."

The comments are consistent with calls by the group's institutional shareholders such as BlackRock or Djerriwarrh Investment, which have called for greater capital returns.

BHP chairman Jac Nasser rejected the criticism saying the company's yield was the best in the sector, paying out about $6 billion in dividends in 2011/12 - an 11 per cent increase for the year to $1.12 a share.

This year's dividend payout ratio itself was 50 per cent, while the share price has outperformed the overall ASX over the last decade, he said.

"We have averaged an over 50 per cent pay out ratio back to shareholders over the decade (including share buybacks)," he replied.

"We think we've got the balance about right: if we pay more dividends we can increase debt, or the balance sheet suffers or we invest less in the business."

Not all investors want higher dividends, with Pengana Capital fund manager Tim Schroeders telling AAP he did not want to see capital investment curtailed to return cash to shareholders only to fall in a growth hole down the track.

Mr Nasser also said the company was committed to a succession process for when chief executive Marius Kloppers departs.

The company has hired global headhunters to search for a replacement, but no date has been set for Mr Kloppers' departure.

Shareholders also heard that BHP does not expect any significant increase in iron ore prices soon, following a year of heavy falls in Australia's biggest export earner.

But Mr Kloppers said BHP was investing through the cycle to prepare for a future when China was interested in consumer goods more than iron ore and steel for its new cities and buildings.