Broker tips 17% total annual return from BHP shares

If you’re looking for exposure to the resources sector, then you may want to consider BHP Group Ltd (ASX: BHP) shares.

That’s the view of analysts at Morgans, which continue to rate the mining giant as one of the best options in the sector.

What is Morgans saying about BHP shares?

According to a recent note, the broker has retained its add rating on the Big Australian’s shares with a $47.00 price target.

Based on where BHP’s shares are trading at present, this implies potential upside of almost 9% over the next 12 months for investors.

In addition, Morgans is expecting BHP to continue paying big dividends to investors. It is forecasting a fully franked $2.96 per share dividend from the miner in FY 2023. This equates to a generous 6.8% dividend yield, which stretches the total potential return to almost 17%.

Why is the broker positive?

Morgans likes BHP due to the company being a lower risk option in the sector. It also believes the company is well-placed to benefit from the global recovery from COVID-19 and highlights the resilience of its dividend profile.

Morgans commented:

We view BHP as relatively low risk given its superior diversification relative to its major global mining peers. The spread of BHP’s operations also supplies some defence against direct COVID-19 impact on earnings contributors. While there are more leveraged plays sensitive to a global recovery scenario, we see BHP as holding an attractive combination of upside sensitivity, balance sheet strength and resilient dividend profile.

Our long-term preference for BHP over RIO continues to pay dividends (literally), with BHP asserting itself as the better miner and with the stronger growth profile.

The post Broker tips 17% total annual return from BHP shares appeared first on The Motley Fool Australia.

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More reading

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• Why is the Rio Tinto share price trailing the ASX 200 on Monday?
• Why these 3 ASX 200 shares have done ‘particularly well’ and remain top holdings into 2023: fund manager
• Time to buy? Which ASX 200 shares are trading on single-digit P/E ratios?
• Are BHP shares in the buy zone following the latest OZ Minerals news?

Motley Fool contributor James Mickleboro 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.

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