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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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).