BHP shares: 3 reasons to buy and 3 reasons to sell

BHP Group Ltd (ASX: BHP) shares have tumbled 0.9% in morning trade on Tuesday. At the time of writing, the shares are changing hands at $49.97 a piece.

Despite today’s decline, BHP shares are up 9.2% for the year to date, and they’re 31% higher than this time last year.

Earlier this month, BHP shares spiked 18% to an all-time high of $59.25 after the mining giant reported an impressive half-year earnings result. 

But the uptick wasn’t sustainable, and the share price sank just as quickly as it jumped. Several announcements and market updates are acting as strong headwinds for the miner’s stock. 

So, if you’re looking to add the mining stock to your portfolio, here are some things you should consider.

3 reasons to buy BHP shares

1. BHP is a premier blue chip

BHP is widely recognised as a premier blue-chip stock with a huge market capitalisation and a strong operational history. The company is a cyclical, rather than a defensive stock. While cyclical stocks are closely tied to the broader economic cycle, they often outperform during periods of economic recovery.

2. Reliable dividend payments 

BHP is a reliable, high-yield dividend stock that often yields around 4% to 6%, fully franked. It has a long history of regular dividend payments dating back to 2006. As a major diversified miner, it maintains dividend payouts even when commodity prices fluctuate thanks to its low-cost operations. 

3. Analysts tip an upside ahead

According to Market Index data, analysts currently have a buy rating on BHP shares. At the time of writing, the share price is tipped to climb another 9.3% to $55.09 a piece over the next 12 months.

3 reasons to sell BHP shares

1. Geopolitical uncertainty

Soaring geopolitical uncertainty, as the US and Israeli war against Iran continues to intensify, has frightened investors and raised concerns about the outlook and expectations for commodities. This directly impacts investor confidence and, therefore, BHP’s share price.

2. Investment return concerns for some projects

There have been reports this month that suggest that BHP’s Queensland coal operations are facing fresh investment challenges. Management told workers that its Queensland mines can no longer compete for investment and that the company was receiving no returns from projects. This type of news raises concerns about BHP’s overall operational efficiency and profitability.

3. Leadership uncertainty

In mid-March, BHP announced that its CEO, Mike Henry, is stepping down after six and a half years in the role. The mining giant reported that Brandon Craig will become its new CEO and Director on the 1st of July. Given that the appointment doesn’t come into effect for three more months, it could drive more share price volatility. 

The post BHP shares: 3 reasons to buy and 3 reasons to sell appeared first on The Motley Fool Australia.

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Motley Fool contributor Samantha Menzies 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 recommended BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.