BHP Group is arguably the most well diversified mining and exploration company there is, and it is a part of every investor’s portfolio for different reasons – maybe for the stable dividends, or to decrease the overall volatility of the portfolio. BHP shares are also one of the best blue chip stocks that trade on the ASX. BHP derives revenues from 4 main commodities – Iron Ore, Copper, Coal, and Petroleum. These commodities are very sensitive to the global economic outlook and activity. With economic activity increasing across the developed world, increased demand and inflation fears have resulted in high commodity prices. BHP shares are trading close to its highs posted earlier this year on the back of soaring iron ore prices.
BHP shares are trading ex-dividend today. As a result, the BHP stock price dipped by 6.86% in trading this morning, dragging the BHP stock price back to levels last seen in December 2020. BHP shares were the worst performing shares on the ASX today, however, it was a day when BHP shareholders cashed in their dividends.
FY21 perfectly illustrates the strength of BHP’s portfolio and its balance sheet as attested by a record final dividend announced on Monday of US$2 per share which is an increase of 151% year-on-year. That takes the full year dividend for FY21 to US$ 3.01 per share – representing a payout ratio of 89%.
The record dividend was the result of operational excellence throughout the year with a strong performance that led to solid free cash flow generation and an efficient margin of 64%.
The group registered a strong upside for its underlying attributable profit which went up by 88% to US$ 17.1 billion. BHP reported solid improvements of its balance sheet that we think is now geared for further growth, thus net operating cash flow rose by 73% to US$ 27.2 billion, while net debt decreased by 66% to US$ 4.1 billion.
In a joint statement, Woodside Petroleum and BHP announced that they have indeed entered into a merger commitment to combine their respective oil and gas portfolios by an all-stock merger to create a global top 10 independent energy company by production. Following BHP’s exit from petroleum, the giant miner will be entering the Potash business with a US$500 million investment and also delisting its secondary LSE listing and unifying the shareholders under the ASX entity. This threw BHP shares in the frenzy and the BHP stock price has been the subject of large amounts of volatility in recent weeks.
BHP shares closed at $41.94 a share today as the stock traded ex-dividend. BHP shares remain as one of the best dividend stocks on the ASX following the sky high distribution in FY21.
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