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BHP and Wesfarmers Ltd: 2 ASX shares to dig into

The BHP Group Ltd (ASX:BHP) share price has decreased 2.0% since the start of the 2024. It's probably worth asking, 'is the BHP share price good value?'
The BHP Group Ltd (ASX:BHP) share price has decreased 2.0% since the start of the 2024. The Wesfarmers Ltd (ASX:WES) share price is tracking 8% off its 52-week lows.

BHP share price

BHP Group (formerly BHP Billiton) is a diversified natural resources company producing commodities that was founded in 1885.

BHP’s principal business lines are mineral exploration and production. BHP’s assets, operations and interests are separated into three focus areas: Copper and related minerals (e.g. gold, uranium, silver, zinc, etc.), Iron Ore, and Coal (i.e. metallurgical and energy).

BHP shares are often seen as a reliable dividend paying investment and is a common constituent of an ASX share portfolio. If you own an popular ETF or LIC, or invest with Industry Super, chances are you have exposure.

WES share price

Founded in 1914, Wesfarmers is an Australian conglomerate headquartered in Perth. It mainly has operations across Australia and New Zealand, operating in retail, chemical, fertiliser, industrial and safety products.

It’s easy to think of Wesfarmers like a publicly listed private equity company. It has a long history of buying businesses, benefitting from their cash flows, re-investing in them and then selling them for a more attractive price. A good example of this might be Coles Group, which is bought in 2007 and spun out in 2018. However, by far (over 50%) of the company’s operating profit comes from Bunnings, the #1 hardware and home improvement business in Australia. It bought the remaining 52% of Bunnings that it didn’t own in 1994 for $594 million. Other brands include Kmart, Target, Officeworks, Blackwoods and Priceline Pharmacy.

Share price valuation

One way to have a ‘quick read’ of where the BHP share price is, is to study something like dividend yield thru time. Remember, the dividend yield is effectively the ‘cash flow’ to a share holder, but it can be influenced by yearly or bi-yearly fluctuations. Currently, BHP Group Ltd shares have a dividend yield of around 5.88%, which compares to its 5-year average of 9.38%. Put simply, BHP shares are trading below their historical average dividend yield.

Since it is a more mature-style business, the WES share price is offering a historical dividend yield of around 2.91%, which compares to its 5-year average of 3.84%. The Rask websites, especially our Rask Education platform, offer free tutorials explaining Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). Both of these models would be a better way to value the WES share price.

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