Site menu

Search by ticker code:
Generic filters

Menu

Search by ticker code:
Generic filters

Search by ticker code:
Generic filters

I Would Consider Selling BHP Group Ltd (BHP) Shares Today

The BHP Group Ltd (ASX: BHP) share price has outperformed the S&P/ASX 200 (INDEXASX: XJO) (^AXJO) since the beginning of 2019.

Unfortunately, share prices mean just about nothing if you don’t know what the company is worth because you’re essentially flying in the dark on the true ‘value’ of the shares.

The Wall Street Journal says the average analyst price target for BHP shares is $35.41 — around 5% below BHP share price right now. So… maybe it’s a bit overvalued?

I wouldn’t — and don’t — trust other analysts’ forecasts because it’s the assumptions and research that’s important — not the final result. However, sources like the WSJ can be a good resource to get your ‘finger on the pulse’ so to speak.

1 Reason I Would Consider Selling BHP Shares

I don’t own BHP shares in my portfolio. But if I did own them, or Rio Tinto Limited (ASX: RIO) shares, I would consider selling.

Why?

Well, when I look at a company like BHP the only appeal I see in it is its dividend yield. It’s a great company, don’t get me wrong.

But given the amount of complexity in the business, the many moving parts and it’s vulnerability to commodity prices, it quickly becomes a very difficult business to model.

When an analyst arrives at a valuation using his or her model, he should input things like prices of iron ore, copper, coal… etc as well as costs and corporate overheads. But unlike a normal business, such as, say, Telstra Corporation Ltd (ASX: TLS) — better still – CSL Ltd (ASX: CSL), the prices of BHP’s products and therefore it’s profits can swing wildly from one year to the next.

Its dividends are more consistent and more reliable.

However, if your only focus is dividends and income, I would suggest it is far more prudent to consider a low-cost ASX Exchange Traded Fund (ETF) or index fund that yields just as much as BHP shares.

Just about any ETF that tracks the ASX 200 should be yielding over 4% today, given the index’s heavy tilt towards dividend shares like Commonwealth Bank of Australia (ASX: CBA) and BHP.

The key reason for buying an ETF like this is that it helps you to mitigate the risk that commodity prices turn against you or that BHP or any individual share in the ASX 200 suffers a meaningful setback to its operations.

That’s why I own an ASX 200 ETF and not BHP shares.

[ls_content_block id=”14948″ para=”paragraphs”]

$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.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

Skip to content