Is the BHP (ASX:BHP) share price a buy right now?

Is the BHP Group Ltd (ASX:BHP) share price a buy at the moment? It hasn't done much over the last few months, but the dividend is bigger.

| More on:
Mining worker making frame with his hands and peering through it

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Is the BHP Group Ltd (ASX: BHP) share price a buy right now? Over the last month it has been as high as $48 and also below $45.

The resources giant is also exactly where it was after it reported a couple of months ago.

FY21 half-year result

BHP reported a mixed set of numbers for the first six months of FY21.

The statutory profit of US$3.9 billion was down 20% compared to the prior corresponding period. However, this included a one-off loss of US$2.2 billion predominately related to the impairments of New South Wales Energy Coal (NSWEC) and the associated deferred tax assets, and Cerrejon.

However, the underlying attributable profit was up 16% to US$6 billion with net operating cashflow increasing 26% to US$9.4 billion.

BHP has been able to use that cashflow to both improve its balance sheet and declare a very big dividend. The net debt position improved by 7% to US$11.8 billion.

The board decided to increase the half-year dividend by 55% to US$0.55 per share. That brings the trailing grossed-up dividend yield to 6.3% at the current BHP share price.

What's the BHP outlook?

In a broader sense, the BHP CEO Mike Henry said:

Creating and securing more options in future facing commodities remains a priority. In nickel and copper, we established further new partnerships, acquired new tenements and progressed exploration.

Our outlook for global economic growth and commodity demand remains positive, with policymakers in key economies signalling a durable commitment to growth and signalling ambitions to tackle climate change. These factors, combined with population growth and rising living standards, are expected to drive continuing growth in demand for energy, metals and fertilisers.

The resources giant also said that whilst the short-term remains uncertain, with vaccine deployment underway (with some uncertainty about timing and effectiveness) a major downside risk to the possible economic range outcomes have been substantially mitigated.

Thinking about iron ore prices, it said that the strong Chinese demand and weak Brazilian exports due to COVID-19 caused iron ore prices to stay high.

BHP's analysis indicates that before prices can correct meaningfully from their current high levels, one or both of the Chinese demand and Brazilian supply factors will need to change materially. In the second half of the 2020s, Chinese demand for iron ore is expected to be lower than today as crude steel production plateaus and the scrap to steel ratio rises. In the long-term, prices are expected to be determined by high cost production, on a value-in-use adjusted basis, from Australia or Brazil. Quality differentiation is expected to remain a factor in determining iron ore prices.

Is the BHP share price a buy?

There is a bit of a mixed bag of thoughts on BHP.

Broker Macquarie Group Ltd (ASX: MQG) rates BHP as a buy with a price target of $57, which has a bullish outlook on shorter-term commodity prices.

UBS is neutral on BHP, but it has a price target of $42 because it thinks that the demand from China isn't going to remain as strong as it is and more iron ore is going to come out from Brazil.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Resources Shares

A smiling miner wearing a high vis vest and yellow hardhat does the thumbs up in front of an open pit copper mine.
Broker Notes

Why Macquarie expects this ASX All Ords copper stock to soar 48% in a year

Macquarie forecasts another big year of gains ahead for this ASX All Ords copper stock. But why?

Read more »

Female miner standing smiling in a mine.
Broker Notes

Why Macquarie predicts Pilbara Minerals shares could surge 71%

Macquarie forecasts a big rebound ahead for Pilbara Minerals shares. Let’s find out why.

Read more »

Two mining workers in orange high vis vests walk and talk at a mining site.
Resources Shares

ASX All Ords mining stock sinks on US silver acquisitions

Investors are bidding down the ASX All Ords miner on US acquisition news. But why?

Read more »

Image from either construction, mining or the oil industry of a friendly worker.
Resources Shares

How these 2 tailwinds could boost the BHP share price into 2026

A leading expert forecasts that BHP shares are set to recover. But why?

Read more »

a miner holds his thumb up as he holds a device in his other hand.
Resources Shares

3 reasons why the BHP share price could still be a buy

There are a few reasons why this mining giant could be appealing.

Read more »

Miner standing in front of trucks and smiling, symbolising a rising share price.
Resources Shares

The pros and cons of buying Fortescue shares in June

Let’s dig into whether it’s a good time to invest in this mining giant.

Read more »

Image from either construction, mining or the oil industry of a friendly worker.
Resources Shares

Why did the Mineral Resources share price rip 15% higher today?

The iron ore and lithium giant was the fastest riser of the ASX 200 on Thursday.

Read more »

A man wearing a hard hat and high visibility vest looks out over a vast plain where heavy mining equipment can be seen in the background.
Resources Shares

2030 forecast: As Australia's iron ore export earnings decline, copper will rise. What does this mean for BHP shares?

BHP is expanding its iron ore and copper production.

Read more »