The BHP Group Ltd (ASX: BHP) share price is dropping into the red on Thursday morning.
In early trade, the mining giant's shares are down 2% to $38.60.
This compares unfavourably to the performance of the ASX 200 index, which is up 0.55%.
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Why is the BHP share price sinking?
Don't worry, today's weakness has not been driven by a broker downgrade or another sharp decline in the iron ore price.
In fact, today's pullback in the BHP share price could be classed as good news for shareholders.
That's because this decline has been caused by the Big Australian's shares going ex-dividend this morning for its final dividend of FY 2024.
When a company's shares trade ex-dividend, it means that the rights to the upcoming payout are now locked in. And even if you were to buy the miner's shares on-market this morning, you wouldn't be entitled to receive this dividend on pay day. Instead, it will go straight into the bank account of the seller of its shares even though they are no longer in their portfolio.
As a dividend forms part of the valuation of the BHP share price, it has tumbled today to reflect this. After all, you wouldn't want to pay for something you won't receive.
The BHP dividend
Last month, BHP released its full-year results and reported a 3% increase in revenue to US$55.7 billion and a 2% lift in underlying attributable profit to US$13.7 billion
This allowed the BHP board to declare a fully franked final dividend of 74 US cents per share (A$1.09 per share).
Based on the BHP share price at yesterday's close, this equates to an attractive 2.8% dividend yield.
Eligible shareholders can now look forward to receiving this in a few weeks on 3 October.
Should you invest?
Analysts at Goldman Sachs think that BHP's shares are great value at current levels.
According to a recent note, the broker has put a buy rating and $49.10 price target on its shares. This implies potential upside of 27% for investors over the next 12 months.
Commenting on its valuation, the broker said:
BHP is currently trading at ~5.5x NTM EBITDA (25-yr average EV/EBITDA of 6.6x), a premium to RIO on ~4.5x; and at 0.85xNAV vs RIO at 0.75x NAV.
Over the last 10 years, BHP has traded at a ~0.5x premium to global mining peers. We believe this premium can be partly maintained due to ongoing superior margins and operating performance (particularly in Pilbara iron ore where BHP maintains superior FCF/t vs. peers).
