The BHP Group Ltd (ASX: BHP) share price currently offers a FY22 dividend yield of 11.5%. Does this make it a buy?
BHP has been a successful mining business for decades. Paying shareholders attractive dividends has been one of its major attractions for a long time.
With the BHP share price currently sitting at around $50, is it worth considering?
BHP share price strength
One of the most obvious pieces of investing advice is to buy low (and sell high). BHP shares are getting closer to their all-time high. Since the start of the year, BHP has risen almost 20%. That may not strike you as a good time to buy.
Cyclical businesses, such as resource companies, go through cycles. Sometimes there’s lots of demand for the commodity and sometimes that demand drops off.
At the moment, things are looking strong for commodity prices. There was strong inflation occurring even before Russia invaded Ukraine, but most commodities are rising as the global investment community worries about what the next impacts on the worldwide economy will be. Russia is responsible for a number of exports, such as oil.
Diversified commodity base
No-one can know what the future will bring. However, with the world increasingly headed towards decarbonisation, BHP looks well positioned with its exposures to copper, nickel and potash.
I think that having a portfolio of commodities, not focused on just one resource, gives the BHP share price and profit an attractive level of defensiveness (for a commodity business) and it also allows the business to pursue various projects.
Over time, BHP can continue to shift its portfolio towards growth-orientated resources. I like the outlook for the Jansen potash project in Canada. This is expected to be able to earn a high profit margin and have a long life.
How big is the dividend going to be?
CommSec numbers suggest that the BHP FY22 dividend is going to be $4.09 per share. That translates into a dividend yield of 11.5% including the franking credits. That’s a huge yield, though it’s expected to reduce to 8% in FY23 (which is still pretty big).
Is the BHP share price worth buying for the dividend?
Is the BHP share price worth looking at for income? That’s up to each investor to decide on this one. For me, I’d prefer to buy ASX resource shares like Fortescue Metals Group Ltd (ASX: FMG), and Mineral Resources Limited (ASX: MIN) and indeed BHP when the iron ore price is a lot lower – perhaps under $100 per tonne, or at least 20% lower than it is today.
There are other ASX dividend shares that I believe look better value.
