Westpac vs BHP shares: Where would I invest $10,000 this week?
Are you tossing up between Westpac Banking Corporation (ASX: WBC) and BHP Group Ltd (ASX: BHP) for your next $10,000 investment? You’re not alone â both are true giants of the ASX, each representing a pillar of the Aussie market. But apart from sheer size, these companies couldn’t be more different: one is all about steady banking, the other about resources and mining. If you’re weighing up Westpac vs BHP shares, let’s unpack how they stack up right now.
The case for Westpac
Westpac has been a cornerstone of Australian finance since its origins as the Bank of New South Wales in 1817. Now one of Australia’s major banks, Westpac offers a mix of consumer, business, and institutional banking across trusted brands like St.George, Bank of Melbourne, BankSA and BT. Its reach covers everything from everyday banking to large-scale corporate finance.
A few fundamentals stand out for Westpac:
- Fully franked dividends: As of the latest data, Westpac pays a 4.57% dividend yield with 100% franking credits. Those dividends appear steady, with recent payouts at $0.77 per share.
- Valuation: Westpac’s P/E ratio sits at 16.62, based on an earnings per share (EPS) of $2.029.
- Reliable payouts: Dividend history shows consistent, fully franked dividends paid on a regular basis, which can mean stability for income-focused investors.
On the flip side, the year-to-date (YTD) return is -10.65%, signalling recent share price weakness.
The case for BHP
BHP Group previously known as BHP Billiton, is a global mining powerhouse and one of the biggest listed companies in Australia. From iron ore and copper to coal and nickel, BHP rides the waves of the international commodity cycle. That makes it a go-to for investors looking for resources exposure and the potential upside from rising commodity prices.
For BHP, here’s what jumps out:
- Strong recent momentum: BHP’s share price has delivered a positive YTD return of 39.28% â that’s a significant run-up, especially against the backdrop of a weakening broader market.
- Dividend muscle: The current yield is 3.97%, with dividends fully franked and notably high dollar payouts (dividend per share $2.42, as per the latest figures).
- Earnings power: BHP’s EPS clocks in at $1.932, with a P/E ratio of 21.96 â higher than Westpac’s, which reflects either loftier earnings expectations or recent share price strength.
As a resources stock, BHP’s fortunes are more closely tied to global commodity demand and prices, so expect higher volatility compared to the banks.
Valuation comparison
Let’s line up the key numbers:
| Westpac | BHP | |
|---|---|---|
| Market Cap | $115.33 billion | $309.83 billion |
| P/E Ratio | 16.62 | 21.96 |
| Dividend Yield | 4.57% | 3.97% |
| Dividend per Share | $1.54 | $2.42 |
| Franking | 100% | 100% |
| Earnings per Share | $2.029 | $1.932 |
BHP commands a higher P/E, likely due to its strong recent momentum or differing market expectations. Both offer full franking on dividends, but Westpac edges ahead on yield.
Recent share price momentum
Comparing recent share price momentum up to 9 October:
- Westpac closed at $33.72, barely changed from the previous day, though recent weeks have seen more down days than up. Its YTD return sits at -10.7%.
- BHP closed at $60.94, recently coming off a minor dip but sitting much higher for the year, with a YTD return of 39.3%.
These figures show recent investor enthusiasm is firmly with BHP, while Westpac shares have lagged.
Which is the better buy?
If I were putting $10,000 to work this week, my pick would be BHP. That’s mostly down to momentum â BHP’s share price has soared nearly 40% this year, while Westpac has struggled. Usually I’d pause after such a strong run, but BHP’s global exposure to commodities could keep driving performance if demand holds up.
Yes, Westpac pays a higher dividend yield (and also with full franking credits), which can tempt income seekers. But, with its share price going backwards and little growth on offer in the near term, it looks stuck in neutral compared to BHP’s dynamism.
Valuation-wise, Westpac’s lower P/E ratio does make it look more attractively priced on headline numbers, but the banking sector’s outlook remains challenged by slower lending growth and ongoing regulatory headwinds. BHP’s higher multiple reflects a market willing to pay up for outsized earnings potential.
It’s not a one-sided contest â a contrarian might fancy Westpac for dividends and a recovery. But for me, given the current data and recent price momentum, BHP offers broader exposure and the best mix of growth and income opportunities right now.
The post Westpac vs BHP: Which ASX giant is the better buy right now? appeared first on The Motley Fool Australia.
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Motley Fool contributor Laura Stewart 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. This article was prepared with the assistance of Large Language Model (LLM) tools for the initial draft. Any content assisted by AI is subject to our robust human-in-the-loop quality control framework, involving thorough review, substantial editing, and fact-checking by our experienced writers and editors holding appropriate credentials. The Motley Fool Australia stands behind the work of our editorial team and takes ultimate responsibility for the content published by The Motley Fool Australia.