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BHP Group Share Price Drops 4% – Is It A Buy For Dividend Income?

This morning the BHP Group Ltd (ASX: BHP) share price fell 4% after going ‘ex-dividend’.

Who is BHP?

BHP, sometimes called ‘The Big Australian’, is a world-leading resources company, extracting and processing minerals (like iron ore and copper), oil and gas, and has more than 62,000 employees and contractors, primarily in Australia and the Americas. Headquartered in Melbourne, BHP has shares listed on both the ASX and London Stock Exchange (BHP Billiton Plc).

What Does ‘Ex-Dividend’ Mean?

The ‘ex-dividend’ day signals the first day that investors who buy BHP shares won’t receive the next dividend payment. Meaning, they had to own shares yesterday to receive the dividend. Think of it like BHP shares are now ‘excluding’ the upcoming dividend. Learn more about share dividends here.

Why did BHP shares fall today?

Companies pay dividends out of their cash reserves. As a part-owner of BHP via the shares, the amount of cash in the company is reduced (because the cash is being sent to shareholders).

So because BHP is paying $US1.02 per share in dividends from its cash reserves to its shareholders, the shares should be worth $US1.02 per share less after it has paid the dividend, right? That’s why it falls.

Are BHP Shares A Buy For Dividend Income?

As I first noted in August, BHP has been strengthening its balance sheet by selling assets and paying down debt following a rebound in commodity prices. This trend will likely continue into 2019. That means its forecast 5.8% dividend yield looks very tempting right now.

However, as I noted here, there’s a lot more to consider, including risks and valuation. As I detail in that article, a good price to buy at might still be below the current share price.

Bottom line: while I think investors could do a lot worse than buy BHP shares for dividend income (in a diverse portfolio), it’s NOT going in my portfolio anytime soon. If I was looking for a ‘core’ blue chip investment with global exposure, I’d look to the ETF below (I already own it)…

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$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

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