In my opinion, the Bapcor Ltd (ASX: BAP) share price and dividend yield offer more growth than BHP Billiton Limited (ASX:BHP) shares.
BHP Billiton
BHP Billiton is the $130 billion (with a 'b') company nicknamed 'The Big Australian'. It mines iron ore, copper, coal and other minerals. It also has substantial U.S. onshore oil interests.
In 2016, BHP — despite its enormous size — was forced to slash its full-year dividend from $1.60 per share to less than 40 cents as commodity prices tumbled.
At the time, its shares had sunk to a low of $16 from over $35 just 18 months earlier.
Ultimately, the problem for BHP is that no matter how big it is, it does not control the price of its products. Sure, it's one of the lowest-cost producers of many minerals (like iron ore), so competitors will go out of business long before BHP throws in the towel. But having the lowest-cost mines doesn't stop the company's revenue and profit flying all over the place as market prices change.
Prior to its dividend cut, which was gut-wrenching given shareholders had just witnessed the value of their shares cut in half, BHP had a "progressive dividend policy". That meant dividends would stay the same or increase every year. So much for that!
A better dividend share idea
Rather than buy shares of BHP, I'd prefer to buy Bapcor shares (at the right price).
Formally known as Burson, Bapcor is the owner of a number of aftermarket automotive parts businesses, including Burson and Autobarn. It is also the supplier of choice for mechanics from Midas and ABS, and Autopro.
Interestingly, Bapcor is a surprisingly defensive business. Meaning that in a recession more people choose to fix their cars rather than buy a new one. That offers Bapcor some strong defensive qualities.
Bapcor shares offer a dividend yield of 2% fully franked, but that dividend is expected to increase over coming years. So while BHP has a bigger dividend yield now, I expect Bapcor's to be much bigger in the future.
