The BHP Group Ltd (ASX: BHP) share price has been dropping in recent times. Is it a buy now that it has fallen?
BHP is comfortably the biggest business on the ASX. But, it’s a bit smaller after falling by more than 10% since 26 August.
With the latest movements, I think it’s worth asking the question.
Is the BHP share price a buy?
I think that any business that falls is worth considering whether it’s good value.
One of the most interesting things about BHP is that it isn’t focused on just one commodity. It has been generating big profit with its iron ore division. But, it’s also exposed to other resources like copper, nickel and coal.
To put it into perspective, in FY22 the business generated US$40.6 billion of underlying EBITDA (excluding its petroleum division, which has been divested).
Iron ore made US$21.7 billion of underlying EBITDA, copper made US$8.5 billion of underlying EBITDA and coal generated $9.5 billion.
I think the business has shown the usefulness of its diversification strategy. While iron ore profitability is reducing, its other segments can pick up the slack. While coal is certainly not going to win any popularity contests, it’s generating big money for BHP right now.
Greener portfolio
With oil now out of the business, there’s only coal left in the portfolio that some investors may not like.
I think BHP is making good progress for a decarbonised future. Nickel and copper are important for the electrification of economies.
BHP recently tried to buy copper miner OZ Minerals Limited (ASX: OZL) to boost its copper credentials, though this was knocked back.
The potash project, Jansen, is every interesting. Fertiliser is not typically what BHP has dabbled in, but I think it’s a smart move – it could prove to be more consistent than materials like iron ore. Jansen is expected to earn a high EBITDA margin once it’s fully operational.
Big dividend
BHP is a massive dividend payer. While the dividend may be smaller in the next few years, the lower BHP share price could make up for that.
In FY23, BHP is expected to pay a dividend of $3.15 per share. In yield terms, this would be 11.8% if including the franking credits.
Final thoughts
I think that BHP could be a decent option for investors that are focused on income returns. Over the long-term, we can receive a lot of dividend income whilst also benefiting from an evolving portfolio of commodities that will hopefully have long-term demand. I’d be happy to buy a few BHP shares today and buy more if there’s further weakness.
But, there could be other ASX dividend shares that are able to produce stronger capital growth.
