BHP share price in focus
BHP Group (formerly known as BHP Billiton) is a diversified natural resources company founded in 1885 that produces commodities for energy use and manufacturing.
BHP’s core 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). While these categories make up the bulk of revenue and profit, the company is also diversifying into other areas such as fertiliser.
BHP shares have long been viewed as a reliable dividend-paying investment and are a common member of Australian share portfolios. It’s also one of the largest companies in Australia so if you own an ASX 200 ETF or LIC, or even have money in superannuation, chances are you already have some exposure to BHP shares.
RIO shares
Founded in 1873, Rio Tinto is today the world’s second largest metal and mining company, behind only BHP Group. Rio Tinto is engaged in minerals and metals exploration, development, production and processing.
Rio can be divided into four core business units: Aluminium, Copper & Diamonds, Energy & Minerals and Iron Ore.
Of the four units, iron ore (the primary component in steel manufacturing) is by far the largest export. It’s no surprise then that the performance of the company can be strongly affected by the price of iron ore and other key commodities, making earnings somewhat volatile.
BHP share price valuation
One way to have a ‘fast read’ of where the BHP share price is could be to study something like dividend yield over time. This can give us a sense of the stability of the company and whether they can consistently pay out a percentage of profits.
Remember, the dividend yield is basically the ‘cash flow’ to a shareholder, but it can fluctuate year-to-year or between payments. Currently, BHP Group Ltd shares have a dividend yield of around 5.51%, compared to its 5-year average of 6.86%. In other words, BHP shares are trading lower than their historical average dividend yield. Be careful how you interpret this information though – it could mean that dividends have fallen, or that the share price is increasing, or both. In the case of BHP, we can see that last year’s dividend was less than the 3-year average, so the dividend has been falling.
RIO is offering a historical dividend yield of around 5.48%, which compares to its 5-year average of 6.42%. Of course, this is just one of many ways you could put a value on RIO shares. The Rask websites offer free online investing courses, created by analysts explaining valuation methods like Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). They even include free valuation spreadsheets! It’s important to look at multiple methods when you’re trying to value the RIO share price.
