‘It’s a buy’: Why are BHP shares in the good books of this expert?

Iron ore prices, dividend yields, and the BHP Group Ltd (ASX: BHP) share price have been the talk of the town lately. And, as ASX dividend fans will know, the three are markedly connected.  

BHP relies on iron ore for much of its income. More than half of the S&P/ASX 200 Index (ASX: XJO) giant’s record financial year 2022 earnings before interest, tax, depreciation, and amortisation (EBITDA) came from its iron ore operations.

Such earnings, in turn, saw it post a $2.55 final dividend, bringing its full-year payout to $4.63. That leaves its stock trading with a 12.2% trailing dividend yield at its current share price – $37.775.

And one expert appears to believe now is a good time to get in on the ASX 200’s largest company. Keep reading to find out what the fundie likes about the materials giant.

Why is this expert optimistic about BHP shares?

Bearish outlooks on the future of the iron ore price could be making would-be investors wary of BHP shares.

But Wheelhouse Partners managing director and portfolio manager Alastair MacLeod still likes the company for one reason: Dividends. The fundie said, via Livewire:

I think from an income perspective, it’s a buy … but it’s a very cyclical business.

In a very cyclical industry, if you look forward three or four years, I think the expected dividend moves more towards $2 a share in Aussie, which is still about a 5% yield.

So, from an income perspective, I think over the next couple of years, I think it’s a buy because it’s a market-leading position and that yield I think compensates for the cyclicality or the risk to earnings.

However, Plato Investment Management managing director Dr Don Hamson reportedly disagrees, marking the stock a hold amid faltering iron ore prices.

The two experts are far from alone in offering differing opinions on the future of BHP shares.

Bennelong Kardinia Absolute Return Fund portfolio manager Kristiaan Rehder recently told my colleague Bernd the fund is optimistic about demand for BHP’s production amid a potential reawakening of the Chinese economy.

Meanwhile, Liberum Capital is said to have slapped the stock with a sell rating.

Finally, Goldman Sachs tips the BHP share price to lift to $42.50, hitting it with a buy rating. The top broker also expects the company’s dividend yield to come in at 6.6% in financial year 2023.

The post ‘It’s a buy’: Why are BHP shares in the good books of this expert? appeared first on The Motley Fool Australia.

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More reading

• Could ASX 200 iron ore shares be heading for more pain?
• The BHP share price went backwards in October. Time to pounce?
• Why is the BHP share price getting hammered on Friday?
• Batten down the hatches as RBA may hit households with ‘supersized’ interest rate hike on Melbourne Cup day
• If the government has this right, the BHP share price could come under some serious pressure

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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