The BHP Group Ltd (ASX: BHP) share price has done very well in the last few months since China first started showing signs of ending COVID lockdowns.
The mining giant is benefiting from the increasing investor sentiment regarding the Asian economic giant. In just three months the BHP share price has risen 24%.
In early 2022, when the West stopped trying to limit the spread of COVID, there was a big boost to economic output in countries like the US. Inflation was driven too high by all that demand.
Is it time to buy BHP shares?
A return of full Chinese economic capability could mean more demand for all of the commodities that BHP produces like iron ore, copper, nickel and even coal.
Stronger resource prices may mean that BHP shares can make more profit and pay bigger dividends.
At the moment, CMC has a FY23 forecast for BHP of $4.56 for earnings per share (EPS) and $3.06 per share for the dividend.
That implies that BHP shares could be priced at 11 times the 2023 projected profit with a 6.2% dividend yield excluding franking credits (tax credits).
My verdict
BHP is perhaps the biggest success story on the ASX. It is a giant, global company. But that also means it’s not likely to grow very much.
I believe that investing in the mining share needs to be done at the right price, not after a rapid climb of the BHP share price.
In other words, I think it’s better to buy when the share price is languishing and investors are pessimistic about the company.
But, the next time it goes below $40, I think BHP shares could be a solid long-term buy for dividend income.
One of the things I’m most positive about is its focus on greener resources like copper, with its in-progress acquisition of OZ Minerals Ltd (ASX: OZL) and the expansion into potash, a greener fertiliser. Potash could be a good, high-margin earner for the business in the coming years.
