Could buying BHP shares under $44 make me rich?

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptopA young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop

The BHP Group Ltd (ASX: BHP) share price has sunk to below $44. We haven’t seen the price go this low since November 2022. So, after such a significant fall, is the ASX mining share now worth digging into?

I think one of the most important things to note is that the business has gone ex-dividend. That means BHP shares are no longer trading with an entitlement to the FY23 half-year dividend of 90 US cents per share — or AU$1.363.

Certainly, this can justify some of the fall in share price. But, it’s actually down by 10.3% since 6 March 2023.

There has been considerable volatility over the past month, with plenty for investors to ponder.

BHP produces a number of different commodities including iron, coal, copper, and nickel. While the BHP share price, dividend, and profit are influenced by commodity prices, investors can also decide to push down share prices if it seems there is reason to worry about the Australian, or global, economy.

What’s going on with the global markets?

Investors recently had to digest the news that two mid-tier US banks were being taken over by authorities. The prospect of a potential banking collapse would, unsurprisingly, be concerning for investors. There are also concerns about Credit Suisse in Europe.

Less global demand in the economy could mean less demand for commodities, hurting the profits of ASX mining shares like BHP.

The slower-than-hoped Chinese economic growth in 2023, so far, may also be weighing on investor attitudes toward the business.

Overall, things aren’t looking as good as they were in January.

Is the BHP share price a buy?

While things certainly do look a bit wobbly, I think this is the type of environment that opens up opportunities for brave investors.

Keep in mind that the iron ore price is still healthily above US$120 per tonne, meaning that BHP should be making good profit at these levels. That’s good news for dividend-focused investors. Shareholders can endure short-term volatility if they’re still getting large dividends.

I like the company’s plans to unlock further logistical improvements across its network, which would allow it to ship more iron.

As well, BHP’s plans to grow in copper, nickel, and potash looks attractive to me as the world turns greener. It could also mean that BHP is less reliant on China to buy all of its commodities.

However, while today may be a decent time to invest in BHP shares, remember that it’s a huge business, so there may not be a lot of capital growth in the long term. Certainly, I wouldn’t rely on share price growth to achieve great riches – it’s more about buying at the right time in the cycle and collecting dividends, in my opinion.

According to Commsec, the BHP share price is valued at 10x FY24’s estimated earnings with an FY24 grossed-up dividend yield of 10%.

The post Could buying BHP shares under $44 make me rich? appeared first on The Motley Fool Australia.

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More reading

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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.

from The Motley Fool Australia

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