BHP Group Ltd (ASX: BHP) announced its September 2020 quarter update this morning. Based on that, I still think it’s a solid ASX dividend share.
How did it perform in the September quarter?
BHP said that it continues to safely operate through the COVID-19 pandemic and deliver strong outcomes.
The resources giant said that overall copper equivalent production increased by 2% in the September 2020 quarter.
Compared to the prior corresponding period, iron ore production rose by 8% to 66Mt, metallurgical coal production rose 4% to 10Mt, energy coal production fell 17% to 5Mt, petroleum production fell 9% to 27 MMboe (million barrels of oil equivalent). Nickel production rose 3% to 22kt.
BHP revealed that all production and unit cost guidance remains unchanged for FY21, except for Cerrejon production guidance which is under review due to an ongoing strike.
The miner said that its major projects under development in petroleum, copper and iron ore are tracking well. BHP gave some updates as follows:
Atlantis Phase 3 achieved first production in July 2020, ahead of schedule and on budget. First production from the Spence Growth Option is expected between December 2020 and March 2021. The Jansen Stage 1 project remains on track for a final investment decision in the middle of the 2021 calendar year. As a result of COVID-19 delays and the earlier challenges encountered on lining the shafts, BHP has approved the incremental funding for completion of the current shaft lining project.
BHP also recently announced it’s going to acquire another 28% of petroleum asset Shenzi. This aligns with its strategy of buying high quality or near-producing assets.
In copper exploration, the third phase of the drilling program at Oak Dam in South Australia delivered encouraging results. BHP said there was further high grade mineralised intercepts of copper, with associated gold, uranium and silver confirmed.
I think BHP is still a good ASX dividend share
The ability of resource shares to pay dividends is based on the production and the price that it can get for its commodity.
Petroleum is not in a great place because of lower demand due to COVID-19 impacts. But it’s iron ore that is the key division for BHP. The iron ore price remains resilient thanks to Chinese demand. Australian iron ore continues to do well because of the difficulties in Brazil because of COVID-19. BHP currently offers a fully franked dividend yield of 4.8%.
If I were already a long-term BHP shareholder I’d want to hold for the continuing strength of iron ore. But for potential investors I think I’d want to wait. The best time to buy a resource share is when the commodity price is low, which iron isn’t right now. There are plenty of other ASX dividend shares that could make a better buy for income such as Brickworks Limited (ASX: BKW) or APA Group (ASX: APA).